NOTE:
nothing on this page is to be considered official information;
opinions expressed are those of the webmaster.. NEWS WE THOUGHT
YOU'D LIKE
TO KNOW ABOUT
AND THE HOUSING
PAGE INDEX Beginning thoughts...and a view fromoutsideor "across the pond." How about
the value of Snoopie's dog house - is that in decline, too? NEWS 2012
BEFORE
THE STORM
BROKE...when did the problem move from affordable units,
teardowns,
McMansions to foreclosures? What
is next? PRICES; some
history...the big picture here...Williams Park at left and New
London vacancies, New London apartment projects story.
Stamford and Norwalk build the most affordable housing stock; new
mega-projects such as ANTARES'
may have
some, too! Rep. Frank speaks to CT housing
advocates. Well publicized
fight in Darien; Hartford Courant overview of
CT housing market, May
2007 (link to article).
Tear
down
("makeover") WestportNow...and in North
Carolina, unfinished home
just sits.How
about the pools?
Keeping affordable housing affordable - foreclosure; link to New York Times article on
global banking/finance here.
HomeConnecticut idea (DAY editorial);
changed its number many times - and was alive as S.B. 1057at the end,
ultimately becoming Section 38-49 of
the Omnibus bill 1500 in Special Session. Another DAY
editorial; latest onhomelessnessin Connecticut; homelessnesselsewhere.
2008 "Short" Legislative Session
OLR reports on housing and...NOTHING MUCH PASSES IN 2008, read about
2007 here: Read
interview with one of the "winners" the
"long" Session
2007. Read about the "incentives" housing legislation passed as
part of Omnibus Bill 1500 here!
BLUE RIBBON COMMISSION to
assess the housing/economy linkage - Click here.
Weston reval coming up...
Drop in housing values to affect municipal budgets Frank Juliano, Staff Writer, CT POST
Published 04:41 p.m., Saturday, January 21, 2012
State to revive incentive-based
affordable housing program Caitlin Emma, CT MIRROR October 27, 2011
With the need for affordable housing on the rise, along with rental
prices and family homelessness, the state Office of Policy and
Management plans to reinvigorate a program that provides incentives for
municipalities to create low-cost residential units.
Dimple Desai, OPM's community development director, said the agency is
in the beginning stages of revitalizing the HOMEConnecticut Program
with about $1 million left in remaining funds from 2008.
Created by the General Assembly in 2007, HOMEConnecticut took affect in
April 2008, and served as a voluntary, incentive-based land use program
for municipalities looking to build more low-to-moderate income
housing. The General Assembly originally allocated $4 million for
HOMEConnecticut, and the program began as housing prices peaked during
the first half of 2007.
"People weren’t able to afford housing in Connecticut and towns were
recognizing that they needed to be proactive," said David Fink, policy
and communications director for the Partnership for Strong Communities.
The state handed out $2 million in planning grants of up to $50,000
each to interested municipalities in April 2008, only to watch the
housing market bottom out five months later. The state needed to cut
spending and former Gov. M. Jodi Rell rescinded about $1 million from
HOMEConnecticut.
"When Rell rescinded the money, the signal to the municipalities was,
'What happened to this?'" Fink said. "I think [Gov. Dannel P.]Malloy
has recognized that the program is very flexible."
Fink said OPM began to reconsider HOMEConnecticut when Malloy took
office in early 2011. Desai said five municipalities already received
approval for grants, including Old Saybrook, Sharon, Torrington, East
Lyme and New London. Simsbury, Oxford, Windham, Branford and Berlin
have shown interest in the program, as well.
Old Saybrook First Selectman Michael Pace said the $50,000 grant is
being used to try to preserve the population of youth and young
professionals in Old Saybrook.
"The housing prices were starting to drive young people out," he said.
"I thought we needed to take a look and see what we could do to
preserve housing that we thought was attainable."
Towns like Old Saybrook that choose to create more affordable housing
through HOMEConnecticut can create an Incentive Housing Zone by meeting
two requirements. Twenty percent of the units in the zone must be
affordable for those at 80% of the area median income, and the housing
must meet density requirements of six single-family, 10 townhouses or
duplexes, or 20 multifamily units per acre.
Towns can then qualify for planning grant and incentives of up to
$2,000 for each unit allowed to be built in an IHZ, and up to $2,000
for every multifamily unit building permit issued or up to $5,000 for
every single-family building permit issued. Towns may use the incentive
money for any purpose.
Pace said the town is using the funds to promote construction of Ferry
Crossing, a 5.6 acre development of 16 rental units for those
with low to moderate incomes. Construction for the development broke
ground in May. He said the development will help fill Old Saybrook's
lack of affordable housing, which he discovered drove many families to
live in motels.
"Now I think the state is using us as a model," he said.
Fink said HOMEConnecticut serves as a step toward meeting new economic
and demographic needs in a changing market after the burst of the
housing bubble. He said banks will make smaller loans and people will
need to provide bigger down payments on property, pushing the housing
market in a new direction.
"Both demographically and economically the market is demanding more,
dense, smaller units," he said. "Builders are building smaller so it's
easier to afford the down payment, heating cost and transportation
costs. That’s what the market is demanding now and that’s why a program
like HOMEConnecticut is attractive."
The program remains in its beginning stages, however. Harry Smith of
the Office of Planning and Development in New London said the city
adopted an IHZ totaling 73 acres in different areas of the city, but no
plans for construction exist yet.
"I think it’s just a function of the market here," he said. "Nothing’s
been proposed over the last few months."
Demand for affordable housing remains high in some of Connecticut's
poorest cities, as well. Hartford's Housing Authority reported at least
a year-long wait or more for any of their Low Income Public Housing
programs that serve the elderly, disabled and families.
Tim Regan, supervisor of the Intake Department for New Haven's Housing
Authority, said about 5,000 people are waiting for all Low Income
Housing Programs in the city. He said elderly and disabled people wait
about 2 to 3 years and some families have been waiting since 2007.
Outside
Cleveland, Snapshots of
Poverty’s Surge in the Suburbs
NYTIMES
By SABRINA TAVERNISE
October 24, 2011
PARMA HEIGHTS, Ohio — The poor population in America’s suburbs — long a
symbol of a stable and prosperous American middle class — rose by more
than half after 2000, forcing suburban communities across the country
to re-evaluate their identities and how they serve their populations.
The increase in the suburbs was 53 percent, compared with 26 percent in
cities. The recession accelerated the pace: two-thirds of the new
suburban poor were added from 2007 to 2010.
“The growth has been stunning,” said Elizabeth Kneebone, a senior
researcher at the Brookings Institution, who conducted the analysis of
census data. “For the first time, more than half of the metropolitan
poor live in suburban areas.”
As a result, suburban municipalities — once concerned with policing,
putting out fires and repairing roads — are confronting a new set of
issues, namely how to help poor residents without the array of social
programs that cities have, and how to get those residents to services
without public transportation. Many suburbs are facing these challenges
with the tightest budgets in years.
“The whole political class is just getting the memo that Ozzie and
Harriet don’t live here anymore,” said Edward Hill, dean of the Levin
College of Urban Affairs at Cleveland State University.
This shift has helped redefine the image of the suburbs. “The suburbs
were always a place of opportunity — a better school, a bigger house, a
better job,” said Scott Allard, an associate professor at the
University of Chicago who focuses on social welfare policy and poverty.
“Today, that’s not as true as the popular mythology would have us
believe.”
Since 2000, the poverty roll has increased by five million in the
suburbs, with large rises in metropolitan areas as different as
Colorado Springs and Greensboro, N.C. Over the decade, Midwestern
suburbs ranked high; recently, the rise has been sharpest in
communities the housing collapse hit the hardest, like Cape Coral,
Fla., and Riverside, Calif., according to the Brookings analysis.
Nearly 60 percent of Cleveland’s poor, once concentrated in its urban
core, now live in its suburbs, up from 46 percent in 2000. Nationwide,
55 percent of the poor population in metropolitan areas is now in the
suburbs, up from 49 percent.
Poverty is new in Parma Heights, a quiet suburb of cul-de-sacs and
clipped lawns, and asking for help can be hard. The Parma Heights Food
Pantry, which began serving several dozen families a month in 2006, and
now helps 260, draws a stream of casualties from the moribund economy.
Many never needed food relief before.
Like Mary W., 59, who has worked all her life, most recently at a tire
company in Cleveland, and was always the one to remind colleagues to
donate to charity. Now she is the one who receives it.
When she first came to the pantry, “I cried my eyes out,” said Mary,
who asked that her last name not be used because she did not want her
children to know about her financial troubles.
At Vineyard Community Church in Wickliffe, another Cleveland suburb,
Brent Paulson, the pastor, said he had to post an employee in the
driveway the day the church’s food bank was open to coax people inside,
they were so ashamed to ask for help.
In a sign of just how far the economic distress had spread, one
volunteer saw his former boss come to the pantry, Mr. Paulson said.
The Cleveland Food Bank, which serves six counties, doubled its
distribution between 2005 and 2010. “There’s this sense of surprise,”
said Anne Goodman, the director, “this feeling that this has got to be
a mistake. It has got to be a bad dream.”
Calls to the United Way social services hot line from suburban areas in
northeast Ohio more than doubled from 2005 to 2010, outstripping the
increase in cities. “We are seeing a rise in need in places we never
expected it,” said Stephen Wertheim, director of the hotline, First
Call for Help.
Poverty has been growing in the suburbs for years — along with the
population. But the 53 percent increase in poverty far outstripped the
14 percent population increase in the past decade, speeding the change
in their status as upper-middle-class enclaves. They have been
attracting immigrants following construction jobs and families from
cities seeking inexpensive housing as suburbs aged.
Federal vouchers to get poor people into private housing also
contributed, Ms. Kneebone said. Cleveland was No. 15 among the
country’s top 100 metropolitan areas for increase in suburban share of
vouchers.
Urban problems have appeared. In Penn Hills, a suburb of Pittsburgh
where people have always driven, poor residents walking near yards and
bus stops have created trouble with litter, said Alexandra Murphy, a
Princeton doctoral student studying suburban poverty.
Warrensville Heights, a suburb southeast of Cleveland, was pristine
when Fran Matthews moved there in 1987, with good schools, manicured
lawns and middle-class neighbors, she said. Now for-sale signs dot
overgrown yards. Break-ins are on the rise, though crime is still far
lower than in the city. Over all, the suburban poverty rate — 11.4
percent in 2010 — is still far below the city rate of 20.9 percent,
according to Ms. Kneebone.
“Now when you come home, you have to look around before you get out of
the car,” Ms. Matthews said.
The changes have affected the school system, she said, and her grandson
now attends a charter school in Cleveland.
The double punch of the recession and the foreclosure crisis — which
hit Cleveland and its suburbs particularly hard — has dragged
middle-class people down the income ladder. As defined by the Census
Bureau, the poverty line for a family of four was $22,314 last year.
“This community is middle class, but right on the line,” said Brad
Sellers, a retired professional basketball player who grew up in
Warrensville Heights and is running for mayor. “Any dramatic downturn
can send you over the edge.”
The unemployment rate among black Americans was 16 percent in
September, according to the Bureau of Labor Statistics — nearly double
the national rate, a painful statistic in a suburb that is majority
black.
“Where’s that 9 percent?” Mr. Sellers asked. “Not here.”
Some communities resist the idea that poverty exists. When Ann George,
who runs the Parma Heights pantry with stalwart volunteers, speaks at
churches and community gatherings, “I see the skepticism on people’s
faces,” she said. “They say, ‘This is Parma Heights, not Cleveland.’ ”
Other suburbs are adapting. In Maple Heights, Mayor Jeffrey Lansky
embraced the idea of a food bank, setting aside a space for it in 2008
and having the Fire Department help renovate it. The Cuyahoga County
Public Library now runs after-school homework centers with snacks from
the food bank, aimed at the growing population of poor children.
Edward FitzGerald, the executive of Cuyahoga County, argued that the
increase in the suburban poor population could help lead to a
fundamental change in local government. For years Cleveland had most of
the population — and resources — but policy should reflect the flip in
favor of the county, he said.
And with the state slashing funds, counties and the suburbs they
contain will have to ramp up social services and economic development
on their own, many for the first time.
“You’re talking about governing systems that have never really done
this before,” Mr. FitzGerald said. FOLLOW
THIS ISSUE!
From the complex and national to the hyper-local - read story below...
Housing Authority tenant
rep refuses to
cede post after move to Stamford
Greenwich TIME
Neil Vigdor, Staff Writer
Published 10:42 p.m., Saturday, September 17, 2011
The lone tenant representative on the board of the Greenwich Housing
Authority is refusing to relinquish her post despite moving to
Stamford, which a fellow commissioner contends should preclude her from
serving.
Republican Sam Romeo raised objections at the board's most recent
meeting to Democrat Laura Murphy retaining her seat as a commissioner
of the Housing Authority, which runs 761 low- to middle-income units on
15 properties in Greenwich. Murphy resided for many years in
public housing at Armstrong Court in Chickahominy, but relocated to
Stamford in June after buying a home there, according to George
Yankowich, the board's chairman. That arrangement is unacceptable
to Romeo, the newest of the five
Housing Authority commissioners.
"You've got to be a resident of the town of Greenwich," Romeo said in
an interview. "She doesn't even live in our town. You should resign."
Murphy dismissed questions on the matter when reached by Greenwich Time.
"Technically, this is a dead issue," said Murphy, who declined to
comment further.
Yankowich characterized Murphy as a valuable contributor to the board
in the approximately five years that she has served. Murphy was
reappointed to the board about a year ago, which would leave four more
years in her current term.
"Clearly, she says she bought a house in Stamford," Yankowich said.
"Her goal was to move out of public housing and into private housing. I
think it's admirable that she was able to do it."
Yankowich added that Murphy had expressed a desire to continue her
involvement.
"She's done a lot of work over the last five years," said Yankowich, a
Republican. "She would have loved to stay in town but the economics are
the economics. She's still giving us the same perspective."
Romeo questioned whether it is appropriate for Murphy to serve when she
no longer is part of the constituency of Housing Authority residents,
however.
"That doesn't cut it. What perspective is that?" Romeo said. "How can
you vote on Greenwich matters when you don't have any connection to
Greenwich? I have three or four people in public housing who wanted
that seat."
Fellow Republican Bernadette Settelmeyer noted that Murphy's mother
lives at McKinney Terrace, a public housing complex in Byram.
"My preference is that we have an actual tenant to represent that spot,
I but feel that Laura will play a positive role until we find that
candidate," Settelmeyer said.
The tenant representative on the board is traditionally filled by a
resident of public housing or a recipient of federal Section 8 vouchers
for private housing in town. Romeo provided the newspaper with a
copy of Section 8-41 of the Connecticut General Statutes, which deals
with public housing authorities.
"The chief executive officer shall appoint five persons who are
residents of said municipality as commissioners of the authority,
except that where the authority operates more than three thousand units
the chief executive officer may appoint two additional persons who are
residents of the municipality," the section reads.
An analysis by the Housing Authority's legal counsel, Greenwich lawyer
Lou Pittocco, arrived at a different conclusion, according to
Yankowich. Pittocco not only checked the state statutes but
consulted with the U.S. Department of Housing and Urban Development,
Yankowich said.
"In essence, what he said is that she's not qualified to be
reappointed, but there's nothing that says she can't continue on if
she's so disposed," Yankowich said.
Yankowich maintained that public housing tenants still have ample
opportunity to make sure their voices are heard and that their
interests are represented.
"I don't think it's creating a sense of isolation by not having her
living at Armstrong Court," he said of Murphy. S.F.: New homeless on street as others
find housing
Kevin Fagan, S.F. Chronicle Staff Writer
Thursday, May 19, 2011
Forced into the streets by the economic downturn, hundreds of newly
homeless people have been showing up in San Francisco - in cars and
camper vans. Crushed by the same pressures, the number of
families
without homes has also gone up, according to San Francisco's latest
biennial homeless count, to be released today. The increases come
even
as the city has managed to reduce the number of hard-core people living
for years on the streets, a reduction that has kept the overall
homeless population in check.
"It could have been a lot worse if we hadn't created so much supportive
housing" and secured federal funding for homeless families, said San
Francisco's homeless policy director, Dariush Kayhan.
"These bad economic times have created some challenges."
Overall count down
The new report, based on a count taken Jan. 27, shows that the city's
overall homeless population dropped less than 1 percent, from 6,514 in
2009 to 6,455 in 2011. A breakdown of that count, however, tells
a
more nuanced tale of newly homeless people hitting the street, while
the entrenched population found housing.
For instance, the number of single homeless people on the street -
those not with a family or in a shelter - actually shot up 48 percent,
from 1,269 in 2009 to 1,882 in 2011. But those people were staying on
the street for far less time than before. In 2009, 62 percent of
the
city's indigents fit the federal definition of chronically homeless -
basically, without housing for at least a year. That percentage has now
fallen to 33 percent - a reflection of city policies enacted in 2004
that called for replacing temporary shelters with permanent housing
that has counselors to help people find a job, kick drugs or alcohol,
or get help for mental problems.
In the past two years, 208 beds in shelters, temporary rooms or
drug-treatment programs were cut - but at the same time, 695 supportive
housing units were created.
Still panhandling
Homeless counts all went down by as much as 14 percent in the
traditional panhandling areas of the Tenderloin, mid-Market, Union
Square and Fisherman's Wharf. There, many of those asking for spare
change are now living inside but have been unable to change their
daytime habits, counselors and Kayhan said, making it hard to discern
the decline in homelessness.
But noticing the changing population is no problem in the one area that
saw a huge rise in homelessness: Bayview-Hunters Point. The homeless
count there shot up more than any other area - by 159 percent, from 444
in 2009 to 1,151 in 2011.
On some streets in the city's southeastern waterfront and industrial
neighborhoods, ramshackle vehicles with blankets on the windows for
privacy can be found bumper to bumper. The area has always been a draw
for the vehicular homeless, but there are more of them now.
Unlike the disheveled panhandlers whom many regard as the typical
homeless, those living in cars and vans are often either working or
looking for work.
Jobs hard to find
"There are more and more every day," said Gwendolyn Westbrook, director
of Mother Brown's Dining Room, the main homeless service center for
Bayview-Hunters Point. "It's people working at little jobs after they
lost big ones. They just can't afford a place to live. It's sad."
Kayhan said many of the new campers are coming from out of town to look
for work, creating a "modern-day carpetbagging phenomenon."
Peter Jones, 52, won't argue that point. He came to San Francisco a
year ago from Los Angeles to be near his daughter and look for a job,
and he never found an apartment he could afford. He parks his
camper-van along the southeastern waterfront and bicycles to a
warehouse job a few blocks away. He doesn't see how he can afford
a
place to live, so he's sticking to his van for now.
"The rents are insane in San Francisco," he said. "I may go back to
L.A."
Lee Frieder, 46, takes convention set-up jobs and sleeps in a camper
near Jones. What put him in the camper this past year was an argument
with his San Francisco roommate. He's saving his cash to move back
inside.
"Most of us are pretty functional out here," Frieder said. "These are
just hard times, so we're doing what we have to do."
Those same hard times pushed up the number of people in homeless
families by 15.7 percent, from 549 in 2009 to 635 in 2011. That rise
has been reflected nationally in federal housing reports showing the
tally of families in homeless shelters up 13 percent since 2007.
One reaction has been the Homeless Prevention and Rapid Rehousing
program, funded in 2010 as part of President Obama's stimulus package.
The goal is to find housing for recently homeless people quickly or to
keep them from losing their homes in the first place. San
Francisco
got $8.75 million to spend over three years, and so far the program has
supplied housing for 1,100 people in homeless or about-to-be-homeless
families.
Firsthand view
Mia Carter doesn't need any reports to convince her that the number of
homeless kids, moms and dads has shot up. She sees the proof at
the
Hamilton Family Shelter in the Tenderloin, where she lives with her
four young children and where every other unit is full. She hears it on
the street and at church when other moms tell her of doubling up with
their kids on relatives' couches.
"It's hard enough to be homeless, but homeless with children? You look
around, and we're everywhere," said Carter, 41. "The bad economy has
hit so many people in so many ways, it's amazing."
Without the added federal funding, the number of families without roofs
would have been greater, program managers said.
"Homeless families are different from your chronic population, and take
a different approach," said city Human Services Director Trent Rhorer.
"In the chronics, you find substance abuse, mental illness and other
factors that have put them on the street. But if a family is intact and
homeless, it's generally about income.
"That's where the rapid rehousing approach helps."
Same story elsewhere
Obama's homelessness policy director, Barbara Poppe, said San
Francisco's numbers are typical for the times.
Family homelessness numbers "in many communities are up slightly, and
they would have been much higher if not for the rapid rehousing
program," Poppe said. "And like in San Francisco, the chronic numbers
are down."
Paul Boden, organizing director of the Western Regional Advocacy
Project in San Francisco, praised the rapid rehousing efforts -
"nothing ends homelessness like a home," he said - but said the need
for permanent, affordable housing is more important.
"When the city says it has created hundreds of new supportive housing
units, most of them are just SROs (single room occupancy hotels) taken
out of the private market and put into these programs," Boden said.
"That means poorer people who were living there have to move out to
make room for the new thing. It's just shuffling people around."
S.F. homeless count for 2011:
General homeless population: 6,455 (down 59 from 6,514 in 2009)
In the street: 3,106 (up 397 from 2009)
In emergency shelters: 1,479 (down 37 from 2009)
In transitional housing: 796 (down 168 from 2009)
In jails: 317 (down 77 from 2009)
In hospitals: 169 (up 71 from 2009)
In treatment centers: 241 (down 52 from 2009)
In stabilization rooms: 202 (down 105 from 2009)
In resource centers: 145 (down 88 from 2009)
Administration Seeks Smaller Federal
Role in Mortgages
NYTIMES
By SEWELL CHAN
February 11, 2011
WASHINGTON — The Obama administration released a broad outline on
Friday for the future of housing finance in the United States, calling
for a substantial reduction in government support for the mortgage
market but providing few concrete details about how it should be
accomplished.
In a 31-page report, the administration proposed that the two mortgage
lending giants, Fannie Mae and Freddie Mac, should be gradually
abolished within 10 years at most, and it gave Congress three options
for reducing the government’s role in supporting homeownership. It did
not recommend an option; instead, the document was intended to set
parameters for what is certain to be a heated and protracted debate.
“We need to wind down Fannie and Freddie substantially, and reduce the
government’s footprint in the housing market,” Treasury Secretary
Timothy F. Geithner said in a forum at the Brookings Institution
shortly after the report was released.
In presenting the three options, the administration is taking an
approach similar to the one adopted before the health care debate:
setting out broad principles but leaving some of the thorniest choices
to be decided by lawmakers.
The plan, jointly prepared by the Treasury Department and the
Department of Housing and Urban Development, aims to shrink the
government’s role in the mortgage market and “bring private capital
back to the mortgage market.”
Still, the administration excluded the possibility of completely
eliminating government support for the housing market — as some
free-market conservative Republicans have proposed. But officials said
the government’s role would almost certainly be reduced from what it
was before the financial crisis began in 2008.
Mr. Geithner called the document “a plan for fundamental reform,” but
emphasized that the process would take time because of the housing
market’s fragility.
“We are going to start the process of reform now, but we are going to
do it responsibly and carefully so that we support the recovery and the
process of repair of the housing market,” he said in a statement.
Republicans reacted cautiously to the new blueprint. Representative
Spencer T. Bachus, an Alabama Republican and the chairman of the House
Financial Services Committee, commended the administration for
including ideas from Republicans.
“However, what the administration offered today isn’t a plan to move us
forward, but rather a collection of options to consider,” Mr. Bachus
said in a statement. “What’s needed is a real plan, and we intend to
sit down with administration officials to find common ground.”
Under one option, the government’s historically dominant role in
insuring or guaranteeing mortgages would shrink substantially, and
would be limited to support for creditworthy borrowers with low and
moderate incomes. The other two options would preserve a role for the
government as an insurer of mortgages — but only in times of financial
turmoil, under one possibility.
Fannie and Freddie, which were placed in government conservatorship in
September 2008, along with the Federal Housing Administration currently
guarantee more than 90 percent of all new mortgages. The F.H.A. alone
guarantees about 30 percent, compared with a historical norm of roughly
10 percent to 15 percent.
The first option would limit the government’s role in insuring or
guaranteeing mortgages to programs targeted at creditworthy borrowers
with low or moderate incomes. It would let capital flow from housing to
other sectors of the economy, reduce systemic risk and minimize
taxpayer exposure to potential losses. Under this option, mortgages for
most Americans would be significantly more expensive.
“In particular, it may be more difficult for many Americans to afford
the traditional pre-payable, 30-year fixed-rate mortgage,” the report
noted. Smaller lenders and community banks would find it hard to
compete in the regular mortgage market.
The second option would provide a government backstop to ensure access
to credit during a housing crisis. In normal times, the government
would have a “minimal presence” in the mortgage market, but during
times of financial stress, it would “scale up.”
The government would set the fee that it would charge for guaranteeing
mortgages at a high enough level so that the guarantee would only be
desirable in the absence of private capital, or the government would
restrict the amount of public insurance sold to the private market in
normal times, but allow it to grow to stabilize the market during times
of strain.
The second option would give the government greater ability to soften
the blow of a housing downturn than the first, but the traditional
30-year, fixed-rate mortgage would still be more expensive than it is
now.
The final option would offer explicit government insurance for
securities backed by a targeted range of mortgages. Under this
approach, a group of private mortgage guarantors “that meet stringent
capital and oversight requirements” would guarantee securities backed
by mortgages that meet strict underwriting standards.
A government “reinsurer” would then insure the holders of those
securities, and would pay out only if the shareholders of the private
mortgage guarantors “have been entirely wiped out.” The government
would charge a premium for such insurance; the money would be used to
cover future claims and recoup losses. This final option would provide
the least expensive access to mortgage credit of the three choices,
though mortgage rates would probably still increase. But like the
current system, that option might result in artificially high housing
prices and expose the taxpayer to risks.
Mr. Geithner said the options represented a range between two
undesirable extremes.
“We do take the view that it would be fundamentally untenable for the
country to adopt a model where the government plays no role,” he said.
“We also feel it would not make sense for the country for the
government to, on an ongoing basis, be guaranteeing 80, 90 percent of
the mortgage market.”
Though many of the specifics needs to be hashed out, it seems that a
system of housing-market support dating to the New Deal will be
transformed.
“Going forward, the government’s primary role should be limited to
robust oversight and consumer protection, targeted assistance for low-
and moderate-income homeowners and renters, and carefully designed
support for market stability and crisis report,” the document states.
Mr. Geithner’s remarks at the Brookings forum elicited a variety of
responses from policy experts gathered there. While they disagreed on
the proper role of government support for housing, they agreed that the
emerging system was likely to be vastly different from what has
preceded it.
“I think we ought to be shifting the emphasis away from housing and
other forms of consumption and be laser-focused on two overriding
objectives of economic policy: increasing productivity growth and
broader sharing of the fruits of that growth across income groups,”
said Alice M. Rivlin, a former vice chairwoman of the Federal Reserve.
“And housing may not be the best set of policies to accomplish either
goal.”
But Peter J. Wallison, a prominent conservative critic of the existing
system, objected to the call by officials for continued government
support for private mortgage securitization.
“They do not yet accept the idea that any government backing for
housing finance will eventually result — as it has in the past — in a
disaster for taxpayers,” said Mr. Wallison, a fellow at the American
Enterprise Institute.
As long as only prime mortgages are securitized, he said, “we will not
need any government support other than for low-income borrowers through
the Federal Housing Administration.” Even then, he said, the support
should be on the government’s books (unlike the liabilities of Fannie
and Freddie) and should limit taxpayers’ exposure.
The Consumer Federation of America raised questions about the plan,
saying it would only shift control of the mortgage market to Wall
Street.
“The administration today has laid out a series of options that could
lead to the abandonment of a nearly 70-year commitment to affordable
homeownership by working American families,” said Barry Zigas, director
of housing policy for the organization. “American consumers need
policies that will foster affordable, long-term fixed rate mortgages,
as well as a stable supply of capital that will be available to lenders
of all sizes, including community banks and credit unions.” First area co-housing
project in the works New Haven REGISTER
By Angela Carter, Register Staff, acarter@nhregister.com Published: Monday, January 24, 2011
A group of state residents, mostly from Greater New Haven, are planning
what would be Connecticut’s first co-housing development, possibly in
Milford.
About a dozen adults, across six to seven families, are actively
recruiting other potential homeowners for Green Haven, a pre-planned
neighborhood that would be composed of 26 to 33 units, a fruit and
vegetable garden and a co-owned common house offering recreational
space, child care, a kitchen and dining room and library.
“It’s an intentional community, meaning that the people who live there
are choosing to live there with each other,” said Marie Pulito, one of
the planners. “It’s set up like a condominium in this country, in legal
terms.”
Pulito said the concept follows a Danish model and one of the things
making it unique is that future resident-owners also play the roles of
developers and investors. They will buy the parcel, design and oversee
construction of the individual homes and common house, seek local
land-use approvals and market the development.
Dick Margulis has been coordinating a social networking campaign, that
includes using Twitter and Facebook, and the group also can be reached
by e-mail. “We want a multi-generational community. What we have to do
is reach people where they are,” he said.
Margulis said anyone wanting additional information may call him at
203-389-4413, or send an e-mail to info@greenhavencohousing.org. The
group’s Facebook page is Green-Haven-Cohousing and its Twitter handle
is @greenhavencoho.
Organizers been meeting for about five years and have hired a housing
consultant, architect and lawyer. They’ve identified land at an address
Pulito did not disclose but said it is within two miles of the Milford
train station and near amenities such as a park and golf course.
Pulito said the diverse, multi-generational members share values but
not a common religion and live in places such as New Haven, Bethany,
Cheshire and the Norwalk area. They took a trip to Massachusetts to
visit co-housing communities there. Others can be found as near as New
York, and as far away as the Pacific Northwest.
“The first thing we did was learn something called formal consensus.
There’s no leader, everybody participates as equally as possible in
making decisions,” she said. “Anybody who has a concern, voices the
concern, and it goes on a list. The whole group addresses that concern
until the person feels better about it.”
Although it may take longer to reach a conclusion, everyone plays a
part in arriving at the final decision. “Nobody feels like they haven’t
been heard or decisions were railroaded through,” she said. The
values that Green Haven founders have established include preserving,
protecting and nurturing the environment and adopting practices that
minimize consumption of energy, water and other natural
resources. Pulito said they are striving to make homeownership
affordable and members are committed to cooperative work and
pedestrian-centered common spaces, with cars kept on the outskirts.
“Our values lead us through the decision-making process and they’re
going to help us attract people to our community,” she said. Wall Street drifts lower on home price
and consumer data
YAHOO
By Chuck Mikolajczak
28 Dec. 2010
NEW YORK (Reuters) – U.S. stocks were little changed on Tuesday as
investors were reluctant to take large positions in either direction
and largely shrugged off weaker-than-expected data on consumer
confidence and home prices.
The S&P/Case-Shiller 20-city index
showed prices of U.S. single-family homes fell almost double the
expected pace in October. U.S. consumer confidence unexpectedly
deteriorated month over month in December, hurt by increasing worries
about the jobs market, according to a private report.
"Everybody has done what they need to do. The money that has been put
in place has been put in place until the end of the year -- in spite of
the fact we may get some modestly surprising data," said Peter Kenny,
managing director at Knight Equity Markets in Jersey City, New Jersey.
The Dow Jones industrial average (.DJI) dropped 5.79 points, or 0.05
percent, to 11,549.24. The Standard & Poor's 500 Index (.SPX) shed
0.58 points, or 0.05 percent, to 1,256.96. The Nasdaq Composite Index
(.IXIC) dipped 4.16 points, or 0.16 percent, to 2,663.11.
General Motors Co (GM.N) gained 2.2 percent to $35.37 after several
analysts initiated coverage of the automaker's shares, including
"overweight" ratings at Barclays Capital and Morgan Stanley.
Trading volumes, already light for the holiday season, were expected to
remain thin as the northeastern United States digs itself out from a
blizzard that disrupted air and rail travel at the end of the busy
Christmas weekend.
The blizzard pushed oil prices up to just below 26-month high struck
the previous session with U.S. crude for February up 27 cents at $91.27
a barrel.
Despite the weaker-than-expected consumer confidence data, holiday
sales offered further evidence of a returning consumer according to
several reports.
MannKind Corp (MNKD.O) jumped 7.9 percent to $8.60 after the
inhaled-insulin developer said the U.S. health regulator would not be
able to complete the review of Afrezza by December 29 and would require
about four more weeks. DEJA
VU ALL OVER AGAIN article
here...
U.S. to sue big
banks over mortgage securities: report
YAHOO
Reuters – September 2, 2011
WASHINGTON (Reuters) - The agency that oversees mortgage markets is
preparing to file suit against more than a dozen big banks, accusing
them of misrepresenting the quality of mortgages they packaged and sold
during the housing bubble, The New York Times reported on Thursday.
The Federal Housing Finance Agency, which oversees mortgage giants
Fannie Mae and Freddie Mac, is expected to file suit against Bank of
America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other
banks, the Times reported, citing three unidentified individuals
briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks last
year. They could be filed as early as Friday, the Times said, but if
not filed Friday it said the suits would come on Tuesday.
The government will argue the banks, which pooled the mortgages and
sold them as securities to investors, failed to perform due diligence
required under securities law and missed evidence that borrowers'
incomes were falsified or inflated, the Times reported.
Fannie Mae and Freddie Mac lost more than $30 billion, due partly to
their purchases of mortgage-backed securities, when the housing bubble
burst in late 2008. Those losses were covered mostly with taxpayers'
money.
The agency filed suit against UBS in July, seeking to recover at least
$900 million for taxpayers, and the individuals told the Times the new
suits would be similar in scope.
A spokesman for the Federal Housing Finance Agency was not immediately
available for comment.
The Times said Bank of America, JP Morgan and Goldman Sachs all
declined comment. A Deutsche Bank spokesman told the Times, "We can't
comment on a suit that we haven't seen and hasn't been filed yet."
The practice of subprime lending, wherein mortgage brokers lowered
their standards to entice homebuyers to take out large mortgages to buy
more expensive homes than they could afford, was a root cause of the
mortgage market implosion.
News of the suit could have a negative impact on stocks of the banks in
question on Friday. JPMorgan Chase, Bank of America and Goldman Sachs
are traded on the New York Stock Exchange, while Deutsche Bank is
traded on the German exchange.
S&P 500 stocks index futures were trading down 0.6 percent in Asia.
U.S. Treasury futures also ticked higher..
The Times report said investors fear that if banks are forced to pay
out billions for mortgages that defaulted, the suit could sap earnings
for years and contribute to further losses across the financial
services industry. Burning
down the house New York Post By GEORGE F. WILL Last Updated: 4:23 AM, July 3, 2011 Posted: 10:57 PM, July 2, 2011
“The louder he talked of his honor,
the faster we counted our spoons.”
— Emerson
The louder they talked about the
disadvantaged, the more money they made. And the more the financial
system tottered.
Who were they? Most explanations of
the financial calamity have been indecipherable to people not fluent in
the language of “credit default swaps” and “collateralized debt
obligations.” The calamity has lacked human faces. No more.
Put on asbestos mittens and pick up
“Reckless Endangerment,” the scalding new book by Gretchen Morgenson, a
New York Times columnist, and Joshua Rosner, a housing finance expert.
They will introduce you to James A. Johnson, an emblem of the
administrative state that liberals admire.
The book’s subtitle could be: “Cry
‘Compassion’ and Let Slip the Dogs of Cupidity.” Or: “How James Johnson
and Others (Mostly Democrats) Made the Great Recession.” The book is
another cautionary tale about government’s terrifying self-confidence.
It is, the authors say, “a story of what happens when Washington
decides, in its infinite wisdom, that every living, breathing citizen
should own a home.”
The 1977 Community Reinvestment Act
pressured banks to relax lending standards to dispense mortgages more
broadly across communities. In 1992, the Federal Reserve Bank of Boston
purported to identify racial discrimination in the application of
traditional lending standards to those, Morgenson and Rosner write,
“whose incomes, assets, or abilities to pay fell far below the
traditional homeowner spectrum.”
In 1994, Bill Clinton proposed
increasing homeownership through a “partnership” between government and
the private sector, principally orchestrated by Fannie Mae, a
“government-sponsored enterprise” (GSE). It became a perfect specimen
of what such “partnerships” (e.g., General Motors) usually involve:
Profits are private, losses are socialized.
There was a torrent of
compassion-speak: “Special care should be taken to ensure that
standards are appropriate to the economic culture of urban,
lower-income, and nontraditional consumers.” “Lack of credit history
should not be seen as a negative factor.” Government having decided to
dictate behavior that markets discouraged, the traditional relationship
between borrowers and lenders was revised. Lenders promoted reckless
borrowing, knowing they could offload risk to purchasers of bundled
loans, and especially to Fannie Mae. In 1994, subprime lending was $40
billion. In 1995, almost one in five mortgages was subprime. Four years
later such lending totaled $160 billion.
As housing prices soared, many giddy
owners stopped thinking of homes as retirement wealth and started using
them as sources of equity loans — up to $800 billion a year. This
fueled incontinent consumption.
Under Johnson, an important
Democratic operative, Fannie Mae became, Morgenson and Rosner say, “the
largest and most powerful financial institution in the world.” Its
power derived from the unstated certainty that the government would be
ultimately liable for Fannie’s obligations. This assumption and other
perquisites were subsidies to Fannie Mae and Freddie Mac worth an
estimated $7 billion a year. They retained about a third of this.
Morgenson and Rosner report that in
1998, when Fannie Mae’s lending hit $1 trillion, its top officials
began manipulating the company’s results to generate bonuses for
themselves. That year Johnson’s $1.9 million bonus brought his
compensation to $21 million. In nine years, Johnson received $100
million.
Fannie Mae’s political machine
dispensed campaign contributions, gave jobs to friends and relatives of
legislators, hired armies of lobbyists (even paying lobbyists not to
lobby against it), paid academics who wrote papers validating the
homeownership mania, and spread “charitable” contributions to housing
advocates across the congressional map.
By 2003, the government was involved
in financing almost half — $3.4 trillion — of the home-loan market. Not
coincidentally, by summer 2005, almost 40% of new subprime loans were
for amounts larger than the value of the properties.
Morgenson and Rosner find few
heroes, but two are Marvin Phaup and June O’Neill. These “digit-heads”
and “pencil brains” (a Fannie Mae spokesman’s idea of argument) with
the Congressional Budget Office resisted Fannie Mae pressure to kill a
report critical of the institution.
“Reckless Endangerment” is a study
of contemporary Washington, where showing “compassion” with other
people’s money pays off in the currency of political power, and
currency. Although Johnson left Fannie Mae years before his handiwork
helped produce the 2008 bonfire of wealth, he may be more responsible
for the debacle and its still-mounting devastations — of families,
endowments, etc. — than any other individual. If so, he may be more
culpable for the peacetime destruction of more wealth than any
individual in history.
Morgenson and Rosner report. You
decide. We've been concerned for some time... Who Is James Johnson? NYTIMES
By DAVID BROOKS June 16, 2011 Most political scandals involve
people who are not really enmeshed in the Washington establishment —
people like Representative Anthony Weiner or Representative William
Jefferson. Most scandals involve spectacularly bad behavior — like
posting pictures of your private parts on the Web or hiding $90,000 in
cash in your freezer.
But the most devastating scandal in
recent history involved dozens of the most respected members of the
Washington establishment. Their behavior was not out of the ordinary by
any means.
For that reason, the Fannie Mae
scandal is the most important political scandal since Watergate. It
helped sink the American economy. It has cost taxpayers about $153
billion, so far. It indicts patterns of behavior that are considered
normal and respectable in Washington.
The Fannie Mae scandal has gotten
relatively little media attention because many of the participants are
still powerful, admired and well connected. But Gretchen Morgenson, a
Times colleague, and the financial analyst Joshua Rosner have rectified
that, writing “Reckless Endangerment,” a brave book that exposes the
affair in clear and gripping form.
The story centers around James
Johnson, a Democratic sage with a raft of prestigious connections.
Appointed as chief executive of Fannie Mae in 1991, Johnson started an
aggressive effort to expand homeownership.
Back then, Fannie Mae could raise
money at low interest rates because the federal government implicitly
guaranteed its debt. In 1995, according to the Congressional Budget
Office, this implied guarantee netted the agency $7 billion. Instead of
using that money to help buyers, Johnson and other executives kept $2.1
billion for themselves and their shareholders. They used it to further
the cause — expanding their clout, their salaries and their bonuses.
They did the things that every special-interest group does to advance
its interests.
Fannie Mae co-opted relevant
activist groups, handing out money to Acorn, the Congressional Black
Caucus, the Congressional Hispanic Caucus and other groups that it
might need on its side.
Fannie ginned up Astroturf lobbying
campaigns. In 2000, for example, a bill was introduced that threatened
Fannie’s special status. The Coalition for Homeownership was formed and
letters poured into Congressional offices opposing the bill. Many
signatories of the letter had no idea their names had been used.
Fannie lavished campaign
contributions on members of Congress. Time and again experts would go
before some Congressional committee to warn that Fannie was lowering
borrowing standards and posing an enormous risk to taxpayers. Phalanxes
of congressmen would be mobilized to bludgeon the experts and kill
unfriendly legislation.
Fannie executives ginned up academic
studies. They created a foundation that spent tens of millions in
advertising. They spent enormous amounts of time and money capturing
the regulators who were supposed to police them.
Morgenson and Rosner write with
barely suppressed rage, as if great crimes are being committed. But
there are no crimes. This is how Washington works. Only two of the
characters in this tale come off as egregiously immoral. Johnson made
$100 million while supposedly helping the poor. Representative Barney
Frank, whose partner at the time worked for Fannie, was arrogantly
dismissive when anybody raised doubts about the stability of the whole
arrangement.
Most of the people were simply doing
what reputable figures do in service to a supposedly good cause.
Johnson roped in some of the most respected establishment names: Bill
Daley, Tom Donilan, Joseph Stiglitz, Dianne Feinstein, Kit Bond,
Franklin Raines, Larry Summers, Robert Zoellick, Ken Starr and so on.
Of course, it all came undone.
Underneath, Fannie was a cancer that helped spread risky behavior and
low standards across the housing industry. We all know what happened
next.
The scandal has sent the message
that the leadership class is fundamentally self-dealing. Leaders on the
center-right and center-left are always trying to create public-private
partnerships to spark socially productive activity. But the biggest
public-private partnership to date led to shameless self-enrichment and
disastrous results.
It has sent the message that we have
hit the moment of demosclerosis. Washington is home to a vertiginous
tangle of industry associations, activist groups, think tanks and
communications shops. These forces have overwhelmed the government that
was originally conceived by the founders.
The final message is that members of
the leadership class have done nothing to police themselves. The Wall
Street-Industry-Regulator-Lobbyist tangle is even more deeply enmeshed.
People may not like Michele
Bachmann, but when they finish “Reckless Endangerment” they will
understand why there is a market for politicians like her. They’ll
realize that if the existing leadership class doesn’t redefine “normal”
behavior, some pungent and colorful movement will sweep in and do it
for them.
Banks, SEC in
talks to settle mortgage charges: report
YAHOO
15 April 2011
(Reuters) – The securities regulator is in talks with major Wall Street
banks to settle fraud allegations relating to the sale of toxic
mortgage bonds to various investors that helped unleash the financial
crisis, the Wall Street Journal reported, citing sources familiar with
the matter.
The first settlement with the Securities and Exchange Commission (SEC)
could be reached as soon as next week, while some of the other deals
could take months to work out, the WSJ said.
SEC's negotiations with the banks include JPMorgan Chase, Citigroup
Inc, Morgan Stanley, Merrill Lynch, now an unit of Bank of America, and
UBS, according to the Journal.
The SEC hopes to reach a series of settlements with individual banks
over the sales of mortgage bonds, rather than a big industry wide deal,
the Journal said, citing people familiar with the matter.
The regulator's decision to go for individual settlements reflects
substantial differences in the nature of the civil fraud allegations
faced by each bank, the sources told the Journal.
All of the banks named in the report and the SEC declined to comment to
WSJ.
Spokesmen for JPMorgan and Bank of America Merrill Lynch declined to
comment on the Journal report to Reuters . All other parties could not
immediately be reached for comment outside regular U.S. business hours.
At Legal Fringe, Empty Houses Go to the
Needy
NYTIMES
By CATHARINE SKIPP and DAMIEN CAVE
November 8, 2010
NORTH LAUDERDALE, Fla. — Save Florida Homes Inc. and its owner, Mark
Guerette, have found foreclosed homes for several needy families here
in Broward County, and his tenants could not be more pleased. Fabian
Ferguson, his wife and two children now live a two-bedroom home they
have transformed from damaged and abandoned to full and cozy.
There is just one problem: Mr. Guerette is not the owner. Yet.
In a sign of the odd ingenuity that has grown from the real estate
collapse, he is banking on an 1869 Florida statute that says the bundle
of properties he has seized will be his if the owners do not claim them
within seven years.
A version of the same law was used in the 1850s to claim possession of
runaway slaves, though Mr. Guerette, 47, a clean-cut mortgage broker,
sees his efforts as heroic. “There are all these properties out there
that could be used for good,” he said.
The North Lauderdale authorities, though, see him as a crook. He is
scheduled to go on trial in December on fraud charges in a case that,
along with a handful of others in Florida and in other states, could
determine whether maintaining a property and paying taxes on it is
enough to lead to ownership.
Legal scholars say the concept is old — rooted in Renaissance England,
when agricultural land would sometimes go fallow, left untended by
long-lost heirs. But it is also common. All 50 states allow for
so-called adverse possession, with the time to forge a kind of
common-law marriage with property varying from a few years (in most
states) to several decades (in New Jersey).
The statute generally requires that properties be maintained openly and
continuously, which usually means paying property taxes and utility
bills.
It is not clear how many people are testing the idea, but lawyers say
that do-it-yourself possession cases have been popping up all over the
country — and, they note, these self-proclaimed owners play an odd role
in a real-estate mess that never seems to end. Though they may cringe
at the analogy, as squatters with bank accounts, these adverse
possessors are like leeches, and it can be difficult to tell at times
whether they are cleaning a wound already there, or making it worse.
Either way, Florida is where they thrive.
Many residents of the Sunshine State have grown accustomed to living
beside a home left vacant for years. Now hundreds of these mold-filled
caverns, their appliances long ago spirited off, are being claimed by
strangers.
“There are all kinds of ways the people try to manipulate the system to
their own financial gain,” said Jack McCabe, an independent real estate
analyst with McCabe Research and Consulting. “And you are going to see
it here because Florida is the capital of real estate fraud.”
Mr. Guerette, who now faces up to 15 years in prison, insists that his
business is legitimate and moral. He said he got started last year,
driving around working-class neighborhoods in Palm Beach and Broward
Counties, looking for a particular kind of home: not just those with
overgrown lawns and broken windows, but houses with a large orange
sticker from the county reading “public nuisance.”
The stickers signaled owners out of touch: the county or city was
unable to reach them.
Mr. Guerette filed court claims on around 100 of these properties,
which appear to be in the process of foreclosure. Then he chose 20 that
could be most easily renovated and sent letters to the owners and their
banks — presumably overwhelmed — to make them aware of his plans.
Florida does not require notification. One state lawmaker tried and
failed to close that loophole last year with a bill that never passed.
But it hardly mattered. Nineteen of the owners and their banks did not
respond, Mr. Guerette said.
So he set about fixing up the unclaimed properties. In some cases, he
just mowed the lawn and replaced stolen air conditioners or broken
windows; in other cases, like with Mr. Ferguson, he let tenants make
improvements in lieu of rent.
At his peak last year, he said he managed 17 homes with renters, some
of whom he found on Craigslist, others through a Christian ministry in
Margate, Fla.
Copies of leases show Mr. Guerette included an addendum noting that he
was not the legal owner. Tenants like Mr. Ferguson and his family, who
had been homeless before moving in last year and paying $289 a month,
see Mr. Guerette as a savior.
And neighbors generally agree. “There is no telling who was in and out
of that house,” said Rawle Thomas, who lives next door to Mr. Ferguson
and his family. “I like them, and I’d much rather have someone in there
than the house empty.”
In other cases, though, adverse possession has been more aggressive and
problematic. In Palm Beach County, Carl Heflin spent a year in jail
awaiting trial on fraud, trespassing and burglary charges. But after
accepting a plea agreement and the rejection of his adverse possession
claims, he was arrested again on charges of trying to collect back
rents on houses he had tried to possess.
“The whole time he was harassing us and threatened to burn the house
down with my kids in it,” said Misty Hall, a single mother of two who
rented a home from Mr. Heflin.
Sam Goren, city attorney for North Lauderdale, said any benefits were
outweighed by a simple fact that adverse possessors often overlook:
they are trespassing.
Michael Allan Wolf, a real estate expert at the University of Florida
law school, said adverse possessors also disrupt the chain of title.
Rightful owners end up having to evict tenants. The time between
foreclosure and legitimate resale may be extended.
Even when adverse possessors help stabilize neighborhoods, “It is not
an effective or efficient cure for the foreclosure crisis in Florida,”
Professor Wolf said.
Mr. Guerette says his goals are more charitable. After several
marriages, six children and some minor trouble with the law, he said,
he is now a born-again Christian who sees his new company as a way to
make an honest living, and solve a dire need.
His tenants confirmed that after he was arrested in April, he told them
they could stop paying rent. Even if he is not allowed to keep taking
homes, he said, why should needy people not be matched with homes left
to decay?
“There are over 4,000 homeless in Broward, and the number is growing
all the time,” he said. “I thought I could use these homes and put
people into them. It could be a good thing.”
As Andrew M. Cuomo campaigns for governor, he points to his leadership
of the Department of Housing and Urban Development during the Clinton
administration as proof he possesses the ability and vision needed to
lead New York out of its fiscal and political swamps.
Mr. Cuomo was housing secretary at a critical moment for the nation,
just as its subprime mortgage fever was beginning to spike. It was
during his tenure that the banking industry began to embrace predatory
loans, and these creations led to a housing bubble that badly damaged
America’s banks and nearly toppled its financial system.
An examination of Mr. Cuomo’s tenure atop the agency shows he was quick
to warn about Wall Street’s dangerous hunger for predatory subprime
loans — generally more expensive mortgages sold to people with poor
credit. He counseled caution when many influential players, including
the Federal Reserve and Congress, resisted any suggestion that they
slow the country’s stampede to home ownership.
He also called attention to a pernicious mortgage-broker incentive
payment that drove up interest rates for borrowers — secretly, in many
cases — and that helped put many home buyers into loans they later
found they could not afford.
And, in an effort to reverse decades of discrimination against blacks
and Latinos, Mr. Cuomo pushed the government-sponsored banks, Fannie
Mae and Freddie Mac, to buy more home loans taken out by poor and
working-class borrowers.
But when presented with chances to throttle back on the exploding
subprime market, guard against predatory lending and reel in mortgage
brokers and lenders, Mr. Cuomo several times faltered and backed down,
interviews and records show.
He did not heed local officials and others who wanted him to make
Fannie and Freddie publicly report details about the loans they bought.
And he chose not to impose penalties and other deterrents to ensure
that the giant public banks did not promote dangerous lending.
He also reversed himself, under heavy lobbying pressure from mortgage
brokers and bankers, on the arcane but costly mortgage-broker payments
known as yield spread premiums. These were lucrative bounties that
banks paid to brokers who found new clients; the unwitting borrowers
paid higher-than-market interest rates as a result.
Yield spread premiums fueled the subprime frenzy, according to official
post-mortems on the crisis.
Nearly every political leader whose hands touched the fiscal and
housing crises has had decisions scrutinized, actions questioned.
Already, Mr. Cuomo has heard such rumblings from supporters of his
likely Republican opponent, Rick A. Lazio, a former congressman.
Mr. Cuomo, whose tenure at HUD ended in early 2001, refused repeated
requests to talk about his experience running the nation’s housing
agency and how he wrestled with such policy questions. He gave no
reason for his reticence. Instead, his staff issued a statement, and
his former chief of staff at HUD, Howard B. Glaser, took the role of
surrogate for the candidate.
Mr. Glaser, now a consultant to the mortgage industry, produced an
inch-thick binder that sang Mr. Cuomo’s praises, attacked criticisms
and deflected blame. Its title: “The Myth of Andrew Cuomo and the
Subprime Crisis.”
Some people, particularly from the ideological right, argue that Mr.
Cuomo’s decisions helped set in motion the nation’s economic decline.
Such claims seem likely to grow louder as Congress takes up the
question of the future of Fannie Mae and Freddie Mac.
“Raising the affordable housing low- and moderate-income goal to 50
percent was the key initial step in setting Fannie and Freddie on a
path to insolvency,” said Peter J. Wallison, a conservative scholar who
sits on the Congressionally appointed Financial Crisis Inquiry
Commission, which was created in 2009.
That argument, the record suggests, seems overdrawn. The record shows
that the mortgages bought by Fannie and Freddie during Mr. Cuomo’s
tenure had low default rates. More broadly, if Mr. Cuomo was less
prescient and gutsy than he now claims, no one seriously argues he
deserves some outsize share of the blame for the subsequent collapse.
Far more powerful actors, including the finance industry, its various
regulators, two presidents and Congress, helped create the environment
and wrote the policies that caused it.
To a certain degree, the clock ran out on Mr. Cuomo’s reform ambitions;
within months, George W. Bush was president and Mr. Cuomo was looking
for work. And the worst lapses at HUD and at Fannie Mae, most experts
and regulators now agree, came years after Mr. Cuomo departed, as Bush
appointees set even higher and more perilous goals for personal home
ownership.
So the scorecard for Mr. Cuomo appears mixed. Had he acted tougher, and
perhaps risked more, he might well have forestalled or limited some of
the worst abuses. It could be argued, though, that doing so would have
required of him a degree of foresight lacking in nearly every national
leader of that time.
“If they had put something in with a lot of teeth, it would’ve changed
the world,” said Dwight Jaffee, a University of California, Berkeley,
economist who reported on the role of Fannie and Freddie to the
Financial Crisis Inquiry Commission. “But no one in 2000 that I know of
was thinking about that being necessary.”
Leaning Into a Fight
As the head of a department under near constant attack — at his
confirmation hearing, a Republican senator spoke of wanting to wipe HUD
off the map — Mr. Cuomo severely cut its budget and reshaped its
structure. He also won the removal of several of HUD’s most important
departments, although not the entire agency, as he had said, from an
official federal list of most-troubled government agencies. A practiced
political player, he changed public housing and homeless policy,
rewarded innovation and increased the number of housing vouchers for
the poor.
“Extinction was right there on the table,” said the current housing
secretary, Shaun Donovan, who had been a deputy assistant secretary
under Mr. Cuomo. “It’s pretty clear Cuomo helped save the agency.”
Mr. Cuomo’s style, always, was to lean into a fight. And when he was
appointed secretary in 1997, he saw an easy victory. He planned to
tackle one of the mortgage brokerage industry’s most abusive practices:
the yield spread premium, by which banks paid lucrative bounties to
mortgage brokers who found new clients.
“Too often consumers think the brokers are working for them,” Mr. Cuomo
warned. “In reality, they are working against them.”
By the time the mortgage crisis exploded, nearly 9 out of 10 brokered
subprime mortgages were saddled with these premiums, costing Americans
untold hundreds of millions of dollars.
But when Mr. Cuomo’s moment of decision came in March 1999, he proved
less than bold. Those who had identified the premiums as a true menace
wanted him to declare them illegal, and thus end them. Mr. Cuomo,
though, ultimately ruled that the practice was “not per se illegal.”
Those four words shocked advocates and undercut dozens of lawsuits
intended to end the practice and to protect home buyers.
Under his policy, Mr. Cuomo also did not require mortgage brokers to
disclose such payments to their customers.
The brokers were delighted. But others still harbor anger at Mr. Cuomo.
David Donaldson, an Alabama lawyer who filed a high-profile case
against the mortgage premiums, recently offered one word when asked his
opinion of the former HUD secretary: “Gutless.”
Mr. Donaldson said that at the time he thought he had found a
sympathetic ear in Gail Laster, the HUD general counsel. She supported
the idea of declaring the premiums illegal, he said.
“But she could only go so far, and I could only attribute that to one
person, because there was only one person above her,” Mr. Donaldson
said.
Mr. Glaser disputed that version of events. He said Ms. Laster “flatly
told Cuomo that HUD had no legal authority to ban Y.S.P.’s.”
Ms. Laster now works as a lawyer for the House Financial Services
Committee. She declined requests for a substantive interview.
Was she aware, Ms. Laster was asked by telephone, that Mr. Glaser had
placed the onus on her?
“That’s what they do now, isn’t it?” Ms. Laster said before hanging up.
Mr. Cuomo’s 1999 policy statement held that yield spread premiums could
be legal if mortgage brokers were paid a reasonable exchange for goods
or services. The policy, Mr. Donaldson said, eliminated the ability of
plaintiffs to bring class-action suits, a tactic he regarded as the
most effective way of challenging the premiums.
“If you’ve got to look at every loan and see if it’s reasonable, you
can’t have a class action,” he said.
If Mr. Cuomo’s decision disappointed them, it did not shock lawyers and
others involved in fighting the practice. Mortgage brokers had a
powerful lobby, with members in every Congressional district. Many
legislators in Congress would fight Mr. Cuomo if he moved on the
brokers.
“We’re setting these rules in a context of litigation, with Congress
standing ready to make changes if it didn’t like what we did,” said Mr.
Donovan, the current housing secretary.
Mr. Donaldson and other lawyers eventually hit upon a strategy to press
lawsuits even after Mr. Cuomo’s policy statement; in 2001, HUD, under
the Bush administration, slammed the door shut on those challenges as
well.
Howell E. Jackson, a Harvard law professor who argued for the abolition
of yield spread premiums, said a ban would have hit the industry hard,
and Mr. Cuomo apparently decided against picking that fight.
“In retrospect, HUD was mistaken,” he said. The premiums “really fueled
mortgage brokers, and consumers could never understand it. And it
really fueled the boom.”
For some advocates for borrowers, the concept was all too simple. “It’s
a kickback, and Cuomo did nothing to prevent that,” said Bruce Marks,
chief executive of the Neighborhood Assistance Corporation of America.
“That one thing would’ve had a huge impact on preventing the subprime
crisis that we are in now.”
Congress finally outlawed yield spread premiums in July. The financial
reform legislation forbids mortgage originators to charge fees linked
to anything other than the principal amount of a loan.
Taking On Fannie Mae
Homeownership had jumped during the Clinton administration, to 65.4
percent in 1997, when Mr. Cuomo took charge, from 63.7 percent in 1993.
The ambitious new HUD secretary wanted to keep the number rising.
But Mr. Cuomo quickly learned the HUD secretary was not the most
powerful housing player in Washington. If he wanted to push
homeownership, particularly for low- and middle-income Americans, he
had to tackle Fannie Mae, with its considerable political muscle.
He decided to set the affordable housing goals high, at a fat, round 50
percent of the companies’ business volume. His tactics were not
terribly subtle. The agency commissioned and trumpeted a report showing
that Fannie’s new automated-underwriting system disproportionately
screened out minority borrowers. This infuriated Fannie Mae’s chairman,
Franklin Raines, who is black.
When Fannie Mae resisted HUD’s demand that it produce millions of loan
records, Mr. Cuomo’s agency sent a referral letter to the Justice
Department, accusing Fannie’s vice chairwoman, Jamie S. Gorelick, of
having violated the False Claims Act. Ms. Gorelick, a former deputy
attorney general, was said to have been enraged. The Justice Department
did not pursue the matter. She declined to comment for this article.
But the government banks were on board. More loans would be made. And
the evidence shows that Mr. Cuomo’s higher goals did not force Fannie
and Freddie to make riskier mortgages. In his report to the Financial
Crisis Inquiry Commission, Professor Jaffee, the Berkeley economist,
showed that default rates for mortgages bought by Fannie and Freddie
from 2000 to 2003, under Mr. Cuomo’s goals, were low and declined as
the foreclosure crisis grew.
After 2004, by contrast, when the Bush administration announced an even
steeper increase in the housing goals, Fannie and Freddie began buying
large quantities of poor-quality loans, and the default rates shot
higher and higher.
“Look at the timing,” said Mr. Donovan, the current HUD secretary.
“Fannie and Freddie didn’t start buying these truly bad loans for years
until after Andrew left.”
Faulted on Safeguards
Where Mr. Cuomo can be faulted, according to some analyses, is that
while in office he did not put in place the kinds of requirements and
safeguards that might have prevented what would become Fannie and
Freddie’s mad push into ever riskier loans, or that could have at least
limited their impact.
After all, by 1999, when Mr. Cuomo signaled his intention to raise the
goals, both Fannie and Freddie had made their subprime ambitions well
known, introducing no-down-payment products, openly talking of
capturing half the market and alarming some top aides to Mr. Cuomo.
Indeed, some critics say that Fannie and Freddie appeared to use Mr.
Cuomo’s well-intentioned goals as political cover for getting into the
lucrative subprime market.
“I believe it was simple avarice,” Professor Jaffee said of Fannie and
Freddie’s true ambitions. “ ‘We can buy these mortgages, make lots of
money, and we’ll be rich, and if it works out badly the government can
take us over.’ ”
Some consumer groups pleaded with Mr. Cuomo to prohibit Fannie and
Freddie from buying predatory loans altogether, or at least to impose
penalties. And they urged him to require a public accounting of Fannie
and Freddie’s loans, to see if they were including abusive mortgages in
claiming credit toward achieving the goals. In effect, the public could
have examined the loans the banks were making and sounded the alarm.
“I could tell you, loan by loan, what Bank of America was generating in
a neighborhood,” said Dan Immergluck, a professor of housing policy at
Georgia Tech. “I could not get that for” Fannie and Freddie.
Speaking of Fannie Mae and Freddie Mac, called government-sponsored
enterprises, he said: “I wanted the public to know what kind of loans
the GSEs were buying and investing in. And we didn’t want the subprime
stuff to count toward the housing goals. I think the general conclusion
is that it did.”
But Mr. Cuomo refused to install the measures, and in the end, HUD and
Mr. Cuomo sided with Fannie and Freddie, arguing in October 2000 that
demands for more transparency would impose “an undue additional burden.”
Asked why HUD had not required more detailed data reporting, Mr. Glaser
said, “It was too big a piece to chew off in this rule.”
Professor Immergluck offered a simpler explanation: “They just didn’t
want to do it.”
In fairness to Mr. Cuomo, even consumer advocates who wanted him to
build transparency and stronger safeguards into the housing goals say
it would have been unrealistic to have expected much more from him.
“It would’ve taken a person of tremendous courage and political juice
to be able to effect more protection,” said Margot Saunders, a lawyer
for the National Consumer Law Center. “He could’ve done more, but not a
whole lot more.”
Mr. Cuomo did speak out more loudly and presciently on the question of
predatory lending by private mortgage companies. He held hearings
across the country, and warned — a bit ahead of his time — of the
danger in Wall Street’s growing investment in the subprime market.
In June 2000, HUD and the Treasury issued a report on predatory
lending. It recommended bolstering disclosure requirements, enhancing
consumer protections against high-interest loans and curtailing
prepayment penalties.
It was a fairly powerful report. But it required Congressional and
Federal Reserve action, and when Vice President Al Gore lost the 2000
election to Mr. Bush, Mr. Cuomo was out of a job.
“He wrote what I think is the definitive report on solutions,” said
Judith Kennedy, president of the National Association of Affordable
Housing Lenders. “Whereupon they lost the administration.”
PHOTO OF CONGRESSMAN HIMES SPEAKING ON GUN CONTROL "GSE"
is bureaucrat-speak for "government sponsored entities" not "gun
shooting excess"
Ex-Wall Streeter Himes expects role in GSE
reform
Greenwich TIME
Charles J. Lewis, Hearst Newspapers
Published: 09:04 p.m., Saturday, February 12, 2011
WASHINGTON -- Rep. Jim Himes, D-Conn., a veteran of Wall Street and
housing finance, says he hopes to play a major role in the reform of
Fannie Mae and Freddie Mac, the two failed government-sponsored
companies that have helped home buyers get mortgages but that are now
in government custody.
Last week, the Obama administration urged Congress to consider various
options on reforming the two companies, which have cost taxpayers $154
billion so far, making them the most expensive bailout in the financial
crisis.
That puts the problem smack in Himes' bailiwick as a member of the
House subcommittee on capital markets and government-sponsored
enterprises where, despite his junior status as a second-term House
member and a member of the Democratic minority, Himes said he hopes "to
play a really active role.
"Having spent my non-political career in finance and housing, I am well
positioned to help out on this issue, he said in an interview. "This is
a highly technical area -- but so are financial derivatives. And my
experience in derivatives during my first term shows that if you have
some expertise and people trust you, they will come and seek your views.
Himes spent 12 years with Goldman Sachs, the Wall Street giant, before
joining Enterprise Community Partners, a non-profit, where he worked on
financing housing units in the greater New York area.
As a freshman, Himes worked on the Dodd-Frank financial reform bill
that established a regulatory structure for derivatives, the
often-complex securities that rely on the value of other assets such as
mortgages.
Rep. Maxine Waters, D-Calif., the top Democrat on the panel, said her
subcommittee "is the right place for Himes. He comes to the table,
given his professional background, extremely knowledgeable about the
capital markets and our complex financial system."
The White House recommendations to Congress on the future of Fannie Mae
and Freddie Mac were infused with political caution reminiscent of the
administration's approach to health care reform, in effect tossing the
problem to Congress and urging the lawmakers to follow some general
principles.
One of those principles is to end up "winding down the two firms, the
Federal National Mortgage Association (Fannie Mae) and the Federal Home
Loan Mortgage Corporation (Freddie Mac.)
Both companies held congressionally-approved corporate charters but
were stockholder-owned, a rare hybrid. Hence, they are known as
"government-sponsored enterprises," or GSEs.
Their mission is to provide financing to mortgage lenders by buying
their mortgages and reselling them or bundling them into new securities.
They got off the track five years ago when, competing with Wall Street
firms to build and sell mortgage-backed securities, the GSEs lowered
their standards and began investing in low-quality mortgages.
When the housing market tanked and mortgage defaults soared, the two
GSEs holding billions of dollars of mortgages or mortgage-related
securities were on the cusp of bankruptcy in 2008 when Congress and the
Bush administration enacted legislation that put the two companies in
federal conservatorship and empowered the Treasury Department to plow
financial support into the GSEs so they could honor their debts and
their guarantees.
They were not only too big to fail -- they're too big to just shut down.
The White House report on the future of the GSEs said, "We must proceed
carefully with reform to ensure government support is withdrawn at a
pace that doesn't undermine economic recovery.
The Obama administration said it will work with federal regulators to
gradually reduce the GSEs role and encourage private capital to play
the biggest role in housing finance.
In the meantime, the White House said Fannie Mae and Freddie Mac should
only invest in mortgages that have at least a 10 percent down payment
and to avoid loans for more expensive homes. The current ceiling is
$417,000 nationally, but Congress approved emergency measures two years
ago to raise the limits to more than $700,000 in high-cost areas. That
ceiling is scheduled to dip to $625,000 in October.
Himes says one unexpected outcome of the emerging debate in Congress
may be the embrace by Republican lawmakers of a government role in the
mortgage market.
Traditional 30-year fixed rate mortgages "are as American as apple pie,
they are the cornerstone of a family's ability to build wealth over
time, Himes said. But lenders don't want to hold on to those mortgages
-- they want to sell them. That goal could be significantly jeopardized
if the government provided no backup or liquidity at all, he said.
That has been the role of Fannie and Freddie. "Eliminating that role
would be an extraordinarily drastic step, Himes said.
The Republican majority in the House "needs to understand that the
public likes the 30-year fixed rate mortgage and that there will have
to be some sort of entity that encourages that practice by buying those
mortgages from lenders. Obama seeks new design for housing, Fannie/Freddie
YAHOO
By Kevin Drawbaugh and David Lawder
17 August 2010
WASHINGTON (Reuters) – The Obama administration called for "fundamental
change" at Fannie Mae and Freddie Mac, but a long, politically
explosive debate lies ahead on the future of the bailed-out mortgage
giants and housing policy that affects millions of Americans and
billions in investment.
U.S. Treasury Secretary Timothy Geithner on Tuesday raised basic
questions about the government's long-standing role in subsidizing the
$10.7 trillion housing market and supporting the historic "American
dream" of home ownership. Critically for both homebuyers and
investors, he backed some form of government guarantee for mortgages.
Geithner said a key question was whether the private sector could
provide insurance or guarantees as part of a new home financing regime
with enough safeguards to avoid another mortgage meltdown.
"It is not tenable to leave in place the system we have today,"
Geithner said.
"The challenge is to make sure than any government guarantee is priced
to cover the risk of losses, and structured, to minimize taxpayer
exposure," he told housing industry leaders at a conference convened by
the Treasury almost two years after the government seized Fannie Mae
and Freddie Mac to save them from collapse.
Since then, the two firms -- once lobbying heavyweights able to crush
attempts at reform on Capitol Hill -- have received nearly $150 billion
in taxpayer bailout money and have been placed in conservatorship,
sharply restricting their past activities.
"We will not support returning Fannie and Freddie to the role they
played before conservatorship, where they took market share from
private competitors while enjoying the perception of government
support," Geithner said.
"We will not support a return to the system where private gains are
subsidized by taxpayer losses."
The conference, including some of the mortgage sector's top lenders and
investors, was billed as a "listening session" to help the
administration develop an overhaul plan by January. It comes amid
signs of persistent weakness in housing markets -- an issue that could
weigh on voters headed to the polls in November.
Housing starts rose in July from a downwardly revised level in June but
the pace of new construction was much weaker than forecast and permits
for future building fell to their lowest level in more than a year,
according to a U.S. Commerce Department report on Tuesday.
"NO CLEAR CONSENSUS"-GEITHNER
"It's safe to say there's no clear consensus yet on how best to design
a new system. But this administration will side with those who want
fundamental change," Geithner said.
With Congress focused on elections in November, federal spending
coffers depleted and nerves on edge about avoiding another housing
crash, lawmakers looked unlikely to take on a housing finance overhaul
until 2011, analysts said. Enthusiasm in some quarters for
removing government from housing finance was certain to collide with
the political reality that housing subsides, such as the mortgage
interest deduction, are deeply entrenched in U.S. economic life.
"It is clear that the government should continue to play a very large
role in the housing market," said Mark Zandi, chief economist at
Moody's Analytics and a conference participant.
At the same time, he said, "The housing market is, in my view,
over-subsidized ... We're not getting our money's worth ... It's key
for us to scale back the subsidies."
The problems and costs of Fannie Mae and Freddie Mac were not addressed
in the sweeping Wall Street reform legislation approved by the U.S.
Congress in July -- a yawning gap in the Democratic bill that
Republicans have sharply criticized. Bank and mortgage-backed
securities investors are watching warily as the administration weighs
options, ranging from full nationalization at one extreme to
privatization with no government support at the other, and alternatives
in between.
GUARANTEE ESSENTIAL-PIMCO'S GROSS
A government guarantee is considered essential to at least one major
investor -- Bill Gross, co-founder of bond-trading firm Pacific
Investment Management Co. He said that a government guarantee is needed
to keep mortgages affordable.
"The concept of guarantees is crucial to the liquidity and to the cost
of home financing," Gross said, calling it unrealistic to assume the
private market could step in and replace Fannie Mae and Freddie Mac as
providers of home mortgage liquidity. "It won't work," he said.
"Without government guarantees, mortgage rates would be hundreds --
hundreds of basis points higher, resulting in a moribund housing market
for years."
Shaun Donovan, secretary of Housing and Urban Development, told the
conference that the government's "footprint" in housing finance needs
to be much smaller than it is today.
Fannie and Freddie and the Federal Housing Administration now back 90
percent of new U.S. home mortgages, he added.
The stubborn housing slump was likely to weigh on the minds of voters
already concerned about a sluggish economy heading into November
elections.
Across America, the average congressional district has more than 9
percent of its mortgages delinquent by 90 days or more, according to a
study by Deutsche Bank. That's more than 2-1/2 times the delinquency
rate on election day in 2008. The next di$a$ter
NYPOST
By STEPHEN B. MEISTER
Last Updated: 1:02 AM, May 18, 2010
Posted: 12:20 AM, May 18, 2010
The Federal Housing Administration, which insures home mortgages, not
only failed to learn the lessons of the subprime meltdown, it's been
doubling down on failure. As a result, this taxpayer-backed agency is
headed for disaster.
In 2006, the FHA insured just 3 percent of home mortgages; today, it
insures one of every three. Together with Fannie and Freddie, the FHA
is putting the risk for the entire, $11 trillion US home-mortgage
market on the back of the American taxpayer.
How did that happen? Simple. Private lenders responded to the bursting
of the housing bubble and the subprime (and now prime) mortgage crisis
by toughening their underwriting standards. Meanwhile, the FHA has
stubbornly refused to touch the most basic standard -- the down payment
requirement.
Private-mortgage lenders now require 10 to 20 percent down payments.
But a strapped homebuyer can still get the FHA to insure his mortgage
with as little as 3.5 percent down.
Since the average residential-brokerage commission is 6 percent, that
means someone can buy a home by investing about half of what the broker
makes on the sale -- and get the US government to insure his mortgage.
FHA Commissioner David Stevens doesn't even propose touching this basic
error; his only "fixes" are peripheral, raising the FHA insurance
premium (from 1.75 percent to 2.25 percent) and requiring somewhat
higher down payments (10 percent) from borrowers with very low credit
scores.
Meanwhile, the agency is bleeding. As defaults have skyrocketed among
FHA-insured mortgages, the FHA's capital reserves have dwindled to
about a quarter of the congressionally mandated minimums. As of Sept.
30, the FHA's capital reserves stood at $3.6 billion, about half a
percent of the value of the mortgages it insures, down 72 percent from
a year earlier.
Yes, the FHA has other accounts it can tap -- but if its
capital-reserve fund falls below zero, the FHA can get funded directly
from the Treasury without having to ask Congress for more money.
At the end of February, the "seriously delinquent" rate for FHA-insured
mortgages spiked to 7.5 percent, up from 6.2 percent a year earlier.
And FHA default rates are far higher in some cities. At the end of
2009, they were at 18 percent in Punta Gorda, Fla.; 15.6 percent in
Flint, Mich.; 15.1 percent in Fort Meyers-Cape Coral, Fla. and 15
percent in Elkart-Goshen, Ind.
Apart from insuring one in every three mortgage loans taken out to buy
homes, the FHA also now insures one in five refinancings.
And President Obama recently announced that he'll use FHA insurance to
enable upper-income homeowners who are underwater but still current on
their mortgages to refinance. While Obama claims that the cost of this
program will be limited to the $50 billion he has earmarked as bribes
to convince lenders to accept a reduction in the principal owed to them
on underwater mortgages, the real cost will come down the road when the
FHA-insured refinancings go into default.
Thanks to the FHA, subprime-mortgage lending is alive and well. And
thanks to Obama's latest program, private-mortgage investors will be
able to pick the riskiest of their not-yet-defaulted underwater loans,
and get them off their books and onto the FHA's.
The agency's home page says "FHA.com -- another American Dream comes
true." In fact, it's building a new American night mare -- by
continuing the toxic policies that produced the housing bubble and the
subprime crisis, and putting the taxpayers on the hook for it. Expect
the FHA to be the next big bailout.
WASHINGTON (Reuters) – Sales of previously owned U.S. homes jumped last
month to their highest level in more than 2-1/2 years, but a fall in an
economic activity gauge was a reminder recovery from recession would be
patchy.
The National Association of Realtors said on Monday sales of existing
home sales surged a record 10.1 percent month-over-month to an annual
rate of 6.10 million units as buyers rushed to take advantage of a
popular tax credit for first-time buyers that had been scheduled to end
this month. It was the highest since February 2007 and beat
market expectations for a 5.70 million-unit pace. Sales in September
were at a 5.54 million-unit rate.
"Although the data are biased higher from policy measures, we do
believe this sharp gain signals pent up demand and a willingness to
purchase homes, which is a good sign for the sustainability of the
housing recovery," said Michelle Meyer, an economist at Barclays
Capital in New York.
U.S. stock indexes extended gains on the housing data, which shifted
attention away from an earlier report from the Federal Reserve Bank of
Chicago showing its National Activity Index slid to -1.08 from -1.01 in
September. U.S. Treasury debt prices eased as the market prepared
for another huge dose of supply this week.
The National Activity Index's three-month moving average, CFNAI-MA3,
decreased to -0.91 in October from -0.67 in September, declining for
the first time in 2009.
According to the Chicago Fed, a move below -0.70 in the three-month
moving average following a period of economic expansion indicates an
increasing likelihood a recession has begun. This development
will likely feed into fears the economic recovery that started in the
third quarter may lose some momentum once government stimulus wanes,
given high unemployment which is crimping consumer spending.
Analysts are cautiously hoping a sustained housing market recovery will
help improve the psychology of households, which has been shaken by an
unemployment rate of 10.2 percent, the highest in 26-1/2 years.
EXISTING HOME SALES BOTTOMED
The NAR said data on Monday, which showed broad-based gains in the
largest segment of the housing market, was proof that the decline in
purchases of existing homes had bottomed.
"Home prices are almost there. We are seeing a less of a decline in
house values," said Lawrence Yun, NAR's chief economist.
"Many buyers have been rushing to beat the deadline for first-time
buyer credit that was scheduled to expire at the end of this month, and
similarly robust sales may be occurring in November."
Distressed transactions accounted for 30 percent of sales last month
and continued to weigh on house prices. First-time buyers made up a
third of sales in October. The national median home price fell
7.1 percent from October last year, the smallest decline in over a
year, to $173,100. Homes in foreclosure typically sell for 15 to 20
percent less than traditional homes.
The housing market is slowly mending after a three-year decline, which
contributed to tipping the U.S. economy into its worst recession in
seven decades. Housing construction contributed to economic growth in
the third quarter for the first time since 2005.
Recovery is being supported by the $8,000 tax credit for first-time
buyers, low mortgage rates and falling house prices. The government
this month extended the incentive into next year and added a $6,500
credit for home owners buying a new residence. It had been due to
expire on November 30.
Purchases by the U.S. Federal Reserve of mortgage-related assets have
helped to push home loans down, boosting the affordability of house and
aiding the sector's recovery. On Sunday, St. Louis Federal
Reserve Bank President James Bullard said the U.S. central bank should
keep its mortgage-related asset purchase program beyond a scheduled
expiration in March.
The Fed, which cut interest rates to near zero last December, has
committed to keep borrowing costs ultra low for an extended period of
time. In October, sales of single-family homes -- the biggest
segment of the market -- rose 9.7 percent to an annual rate of 5.33
million units. Condominium and co-ops increased 13.2 percent to a
770,000-unit rate.
Sales were up in all four regions of the country. Prices rose 1.1
percent in the Midwest, which didn't see the same boom as the rest of
the country. They declined in the other three. The rise in the Midwest
was the first price increase in any region since November 2008.
The inventory of existing homes for sale in October fell 3.7 percent to
3.57 million units from the previous month, NAR said. At October's
sales pace, that represented a supply of 7.0 months, the lowest in
2-1/2 years, from September's revised 8.0 months. Blumenthal Backs New Financial Agency
DAY
By Patricia Daddona
Published on 7/15/2009
Direct federal oversight of the often incomprehensible banking and
credit card markets would better protect consumers, Attorney General
Richard Blumenthal testified Tuesday.
Blumenthal defended a bill designed to create a Consumer Financial
Protection Agency, while speaking on a panel of industry experts before
the Banking, Housing, and Urban Affairs Committee chaired by Sen. Chris
Dodd, D-Conn., in Washington. The hearing was telecast live on the
Internet.
The proposal would, in part, establish federal law as a minimum
standard for consumer protection and allow states to enact laws and
regulations if those rules afforded consumers better protection than
federal law, Blumenthal said in written testimony.
He also supported establishing a federal agency that would watch out
for consumers investing in the federal finance markets. Seven distinct
agencies now monitor the markets, he said.
Blumenthal said the bill would restore the “historic state-federal
alliance that existed for so many years so productively in combating
financial fraud” - an alliance that has been replaced with conflict and
tension. Mortgage documents, terms of service and other financial
instruments are so complicated the consumer can easily be misled, he
said.
”Consumers ultimately have to be their own protectors, but anybody who
has to read these documents, and I'm trained to read them, will find
them extraordinarily complex and confusing,” Blumenthal said. “This
(new agency) will not only fill that regulatory black hole but provide
clear truthful disclosure.”
Sen. Richard Shelby of Alabama, a Republican on the Senate committee,
called the proposal flawed and said he favored letting the market work
and consumers make their own decisions. The bill is a “radical
departure from the way we've regulated before,” Shelby charged.
Blumenthal countered that the proposed agency “marks a radical
departure from past practices in a time that demands radical solutions.
It is a fundamental break with the past that is very well justified.”
Earlier, Dodd said the recent failure of federal regulators to protect
consumers swamped by subprime mortgages and covert credit card fees and
the impact on the economy was “unprecedented. “
Eward Yingling, president and chief executive officer of the American
Bankers Association, criticized the bill as one that would penalize the
traditional mortgage industry, most of whom took no part in recent
subprime lending scams.
Peter J. Wallison, the Arthur F. Burns Fellow in Financial Policy
Studies for the American Enterprise Institute, added that language in
the bill calling for easily digestible “plain vanilla products or
services” and imposing penalties for complex instruments when consumers
complained about them would have a chilling effect and force bankers to
limit what they offer.
Blumenthal acknowledged such criticism as valid but pointed out the
legislation is a first draft, and the ultimate need for a “super cop”
to oversee enforcement is vital to coherent consumer protection.
”We can disagree where the floor of enforcement should be, but the
question for Congress should be, 'Do we have a point person … for
protecting consumers … ensuring uniform disclosure nationwide,'” he
said. “Mortgage rescue scams can disappear into the Internet ether and
we need federal enforcement.”
Travis Plunkett, legislative director for the Consumer Federation of
America, said the proposed agency needs authority to address unfair
deceptive and abusive industry practices. He criticized the banking
industry's “elaborate defense of the status quo, minimizing harm (and)
making usual threats that this will impede credit.”
Yingling noted, however, “We are not arguing for the status quo; the
status quo has been a failure. We are arguing for change.”
I-BBC
PERSPECTIVE 2010 HERE
24 August 2010 Last updated at 11:19 ET
US existing home sales drop to 10-year
low
Sales of existing homes in the US plunged 27.2% in July compared with
June to their lowest level in more than 10 years, figures suggest.
Home sales completed in the month stood at an annualised rate of 3.83
million, according to the National Association of Realtors (NAR).
The main reason for the drop was the end of tax credits designed to
boost sales, the body said.
US Economy
* US home sales drop to 10-year low
* Fed takes step to boost recovery
* US sees 131,000 jobs lost in July
* US economic growth slows to 2.4%
Despite that, the figures added to fears about the US economic recovery.
Apprehension about weak housing figures pushed Wall Street lower in
early trading and confirmation of the record low sales in the form of
the NAR report sent shares down further.
The main Dow Jones index fell by 122 points, or 1.2%, to 10,052.18.
"I think [the July figure] is just suggestive of an economy that is
definitely slowing down," said Cary Leahey at Decision Economics.
"Unfortunately it is a situation where we can't have a meaningful
recovery without a meaningful consumer recovery, and we can't have a
meaningful consumer recovery without a recovery in housing."
Greg Salvaggio at Tempus Consulting said: "There is really nothing good
that can be said about these numbers."
Tax credits
The NAR presents monthly sales figures as an annualised rate. This
represents what the total number of sales for a year would be if the
relative pace for that month were maintained for 12 consecutive months.
Home sales in July were at their lowest level since the NAR began
collating its existing homes sales figures in 1999, and were 25% lower
than in the same month a year earlier.
July was also the third month in a row that sales have fallen.
The drop in sales coincides with the end of tax credits for homebuyers,
which expired in May.
"Consumers rationally jumped into the market before the deadline for
the tax credit expired," said Lawrence Yun, the NAR's chief economist.
"Since May, after the deadline, contract signings have been notably
lower and a pause period for home sales is likely to last through
September."
However, he said that lending conditions in the housing market meant
sales could pick up.
"Given the rock-bottom mortgage interest rates and historically high
housing affordability conditions, the pace of a sales recovery could
pick up quickly, provided the economy consistently adds jobs."
Slowing growth
However, many economists are rather gloomy about the US jobs market.
The US economy shed 131,000 jobs in July, the second month in a row
that jobs had been lost.
Recent figures also showed that economic growth in the US slowed
between April and June, with GDP growing by an annualised rate of 2.4%
compared with 3.7% in the previous quarter.
Weaker-than-expected retail sales figures for July also added to
concerns over the strength of the recovery of the world's largest
economy.
Ghost estates testify to Irish boom and bust
Page last updated at 13:42 GMT, Friday, 30
April 2010 14:42 UK
One in five Irish homes is unoccupied
By Paul Henley , BBC News, Republic of Ireland
David McWilliams is the man who coined the phrase "ghost
estate" when he wrote about the first signs of a disastrous over-build
in Ireland back in 2006.
Now, it is a concept the whole country is depressingly
familiar with. Most Irish people have one on their doorstep - an ugly
reminder, says the economist and broadcaster, of wounded national
pride.
"Emotionally, we have all taken a battering," he says. "Like
every infectious virus, the housing boom got into our pores. You could
feel it.
"You'd go to the pub and people would be talking about what
house they'd bought. And now a lot of people, myself included, think
'God, we were conned'."
'Emotional thing'
Mr McWilliams paints Ireland's history as one of "economic
failure".
"So to have risen so quickly and seemingly in the right
direction and then to have that pulled away from us," he says, "it's
more of an emotional thing than a financial thing."
There are 621 ghost estates across Ireland now, a legacy of
those hopeful years. One in five Irish homes is unoccupied.
If the country immediately used them to house every person on
the social housing list, there would still be hundreds of thousands
left over.
The obvious question of who people imagined would live in all
these new-builds makes Irish people wince now.
But hindsight is a wonderful thing. Only a few years ago,
developers feeding money into local government coffers were getting
free rein to build row upon row of five-bedroom detached houses on the
green outskirts of towns nobody had even thought of commuting from
before.
'Raised eyebrows'
Banks were throwing money at members of the public who saw
these houses either as an escape to a better lifestyle or an investment
route to riches.
Builders from eastern Europe were working overtime to create
homes, the value of which was sometimes three times what it is now.
People thought... that
this golden goose would continue to lay golden eggs for ever
Green Party minister Ciaran Cuffe
As the slump set in, the immigrant workers went back home,
the banks ceased lending on the scale that had fuelled the frenzy and
the market disappeared.
Property supply had become completely divorced from property
demand.
County Leitrim alone would have needed about 590 new houses
between 2006 and 2009 to accommodate its population growth. It got
2,945.
The resulting mess is currently being addressed by a
nationwide audit of empty and unfinished housing.
It has raised eyebrows that precise numbers are not already
clear, even to the local councils who gave planning permission for the
homes in the first place.
'Everyone was buzzing'
Ciaran Cuffe is the Green Party minister of state in charge
of the audit.
"It's one heck of a challenge", he says, "because we have the
legacy of many years of poor planning, and an economy that was
overheated, paid far too much attention to construction and was more
interested in the quantity than the quality of homes".
He says Ireland's perceived wealth was part of the problem.
"I think there was a view that demand would continue
indefinitely at a time when we had very high levels of immigration.
"People thought the housing was needed not only for the
people of Ireland but also for others that had come here, and that this
golden goose would continue to lay golden eggs for ever."
People are looking
around and saying - 'what happened? Was that us?'
Economist David McWilliams
Nobody expects the majority of Ireland's surplus new housing
simply to be ploughed down by the bulldozers now.
But Mr Cuffe admits some of the recent headlines in the Irish
press on the subject are not completely wide of the mark.
"I certainly think demolition could be part of the solution
in cases where we have housing estates that are unoccupied, that are
miles away from where people want to live and that were badly built in
the first place."
And indeed, many of Ireland's ghost estates are in the
unlikeliest, most isolated places.
It is strange, looking down vast rows of immaculate
new-builds, taking in their optimistically-planted front gardens and
peering through curtain-less windows into unwanted granite-topped
fitted kitchens, to comprehend the fact that they might never be
occupied.
Mr McWilliams says the whole of Ireland is having to come to
terms with what he compares to a collective addiction.
"Everyone took the property drug at the same time", he says,
"everyone was up at the same time, everyone was buzzing.
"Now we are all in the middle of this huge comedown. And
people are looking around and saying - 'what happened? Was that us?'
And then we look at our bank statements and we realise - 'yes, it was'".
The US sub-prime
crisis in graphics Last Updated: Wednesday,
21 November 2007, 08:07 GMT
The
US sub-prime mortgage crisis has lead to plunging property prices, a
slowdown in the US economy, and billions in losses by banks. It stems
from a fundamental change in the way mortgages are funded.
THE
NEW MODEL OF MORTGAGE LENDING
Traditionally, banks have financed their
mortgage lending through the deposits they receive from their
customers. This has limited the amount of mortgage lending they could
do.
In recent years, banks have moved to a new
model where they sell on the mortgages to the bond markets. This has
made it much easier to fund additional borrowing,
But it has also led to abuses as banks no
longer have the incentive to check carefully the mortgages they issue.
THE RISE OF THE MORTGAGE BOND
MARKET
In the past five years, the private
sector has dramatically expanded its role in the mortgage bond market,
which had previously been dominated by government-sponsored agencies
like Freddie Mac.
They specialised in new types of mortgages,
such as sub-prime lending to borrowers with poor credit histories and
weak documentation of income, who were shunned by the "prime" lenders
like Freddie Mac.
They also included "jumbo" mortgages for
properties over Freddie Mac's $417,000 (£202,000) mortgage limit.
The business proved extremely profitable for
the banks, which earned a fee for each mortgage they sold on. They
urged mortgage brokers to sell more and more of these mortgages.
Now the mortgage bond market is worth $6
trillion, and is the largest single part of the whole $27 trillion US
bond market, bigger even than Treasury bonds.
HOW SUB-PRIME LENDING AFFECTED
ONE CITY
THE SUB-PRIME CRISIS IN
CLEVELAND
For many years, Cleveland was the sub-prime
capital of America.
It was a poor, working class city, hit hard by
the decline of manufacturing and sharply divided along racial lines.
Mortgage brokers focused their efforts by
selling sub-prime mortgages in working class black areas where many
people had achieved home ownership.
They told them that they could get cash by
refinancing their homes, but often neglected to properly explain that
the new sub-prime mortgages would "reset" after 2 years at double the
interest rate.
The result was a wave of repossessions that
blighted neighbourhoods across the city and the inner suburbs.
By late 2007, one in ten homes in Cleveland had
been repossessed and Deutsche Bank Trust, acting on behalf of
bondholders, was the largest property owner in the city.
THE CRISIS GOES NATIONWIDE
Sub-prime lending had spread from inner-city
areas right across America by 2005.
By then, one in five mortgages were sub-prime,
and they were particularly popular among recent immigrants trying to
buy a home for the first time in the "hot" housing markets of Southern
California, Arizona, Nevada, and the suburbs of Washington, DC and New
York City.
House prices were high, and it was difficult to
become an owner-occupier without moving to the very edge of the
metropolitan area.
But these mortgages had a much higher rate of
repossession than conventional mortgages because they were "balloon"
mortgages.
The payments were fixed for two years, and then
became variable and much higher.
Consequently, a wave of repossessions is likely
to sweep America as many of these mortgages reset to higher rates in
the next two years.
And it is likely that as many as two million
families will be evicted from their homes as their cases make their way
through the courts.
The Bush administration is pushing the industry
to renegotiate rather than repossess where possible, but mortgage
companies are being overwhelmed by a tidal wave of cases.
THE HOUSING PRICE CRASH
The wave of repossessions is having a dramatic
effect on house prices, reversing the housing boom of the last few
years and causing the first national decline in house prices since the
1930s.
There is a glut of four million unsold homes
that is depressing prices, as builders have also been forced to lower
prices to get rid of unsold properties.
And house prices, which are currently declining
at an annual rate of 4.5%, are expected to fall by at least 10% by next
year - and more in areas like California and Florida which had the
biggest boom.
HOUSING AND THE ECONOMY
The property crash is also affecting the
broader economy, with the building industry expected to cut its output
by half, with the loss of between one and two million jobs.
Many smaller builders will go out of business,
and the larger firms are all suffering huge losses.
The building industry makes up 15% of the US
economy, but a slowdown in the property market also hits many other
industries, for instance makers of durable goods, such as washing
machines, and DIY stores, such as Home Depot.
Economists expect the US economy to slow
in the last three months of 2007 to an annual rate of 1% to 1.5%,
compared with growth of 3.9% now.
But no one is sure how long the slowdown will
last. Many US consumers have spent beyond their current income by
borrowing on credit, and the fall in the value of their homes may make
them reluctant to continue this pattern in the future.
CREDIT CRUNCH
One reason the economic slowdown could get
worse is that banks and other lenders are cutting back on how much
credit they will make available.
They are rejecting more people who apply for
credit cards, insisting on bigger deposits for house purchase, and
looking more closely at applications for personal loans.
The mortgage market has been particularly badly
affected, with individuals finding it very difficult to get
non-traditional mortgages, both sub-prime and "jumbo" (over the limit
guaranteed by government-sponsored agencies).
The banks have been forced to do this by the
drying up of the wholesale bond markets and by the effect of the crisis
on their own balance sheets.
BANK LOSSES
The banking industry is facing huge losses as a
result of the sub-prime crisis.
Already banks have announced $60bn worth of
losses as many of the mortgage bonds backed by sub-prime mortgages have
fallen in value.
The losses could be much greater, as many banks
have concealed their holdings of sub-prime mortgages in exotic,
off-balance sheet instruments such as "structured investment vehicles"
or SIVs.
Although the banks say they do not own these
SIVs, and therefore are not liable for their losses, they may be forced
to cover any bad debts that they accrue.
BOND MARKET COLLAPSE
Also suffering huge losses are the bondholders,
such as pension funds, who bought sub-prime mortgage bonds.
These have fallen sharply in value in the last
few months, and are now worth between 20% and 40% of their original
value for most asset classes, even those considered safe by the ratings
agencies.
If the banks are forced to reveal their losses
based on current prices, they will be even bigger.
It is estimated that ultimately losses suffered
by financial institutions could be between $220bn and $450bn, as the $1
trillion in sub-prime mortgage bonds is revalued.
Washington — President Barack Obama said Wednesday he is acutely aware
of Nevada’s foreclosure crisis and is evaluating whether more can be
done to help homeowners, including by redirecting unused bank bailout
money for homeowner relief.
Obama warned that using a portion of the $70 billion returned from the
banks may require help from Congress.
On a particular problem vexing Nevadans — the inability of many
homeowners to qualify for refinancing because they have lost so much
equity in their homes — the president would not commit to any changes.
The question is under review, he said.
“There are folks who still find themselves having done all the right
things, always made their mortgage payments, always been responsible,
and are still suffering,” Obama said during a round-table with a
handful of reporters in the West Wing. “This is something that we’re
taking very seriously.”
The president said just days ago he asked Treasury Secretary Timothy
Geithner for a top-to-bottom evaluation of the administration’s
homeowner relief program, Making Home Affordable, to determine “what’s
working and what’s not, and whether there’s more that we can do.”
Democratic Rep. Dina Titus, who had asked the administration to address
shortcomings of the program, welcomed the review as a chance to
continue pressing her case for changes.
“We always looked at the housing programs as works in progress and felt
they would be modified and would be adjusted,” Titus said.
Announced in February, the Making Home Affordable plan has been the
administration’s signature effort to help families avoid foreclosure.
Nevada’s foreclosure rate has topped the nation every month since
January 2007, according to RealtyTrac.
One part of the Obama plan is to help 3 million to 4 million homeowners
at imminent risk of loan default by working with banks to lower the
interest or principal on mortgages to less than 38 percent of
homeowners’ income. The administration offered $75 billion to help
lower interest rates. Bankers are paid for each loan modified.
The other part of the Obama plan is to help 4 million to 5 million
homeowners refinance at today’s lower interest rates, which could
provide relief by potentially shaving hundreds of dollars off monthly
mortgage payments.
But it is this second part of the plan that has bedeviled Nevada.
The problem is this: To qualify for refinancing, homeowners must owe no
more than 105 percent of the home’s current value — say, a $210,000
mortgage on a $200,000 home.
That’s increasingly difficult in Las Vegas, where housing prices have
fallen by one-third in the past couple of years and equity has vanished.
Nevada has a greater rate of mortgages underwater — meaning the homes
are worth less than the mortgages — than anywhere in the nation,
according to the most recent data from First American CoreLogic for the
final quarter of 2008. In one northwest Las Vegas ZIP code, mortgages
are 20 percent more than home values.
Some homeowners say they would rather walk away from their homes than
keep paying off a house that may take decades to recoup value.
The White House refinancing plan was an improvement in that previously
loans backed by Fannie Mae and Freddie Mac needed to have 20 percent
equity to qualify for refinancing.
Still, Titus, and more recently Senate Majority Leader Harry Reid, have
urged the Obama administration to loosen the equity requirement,
arguing that with unemployment now at 11.6 percent, refinancing could
help avoid foreclosures.
Opponents, however, have warned that taxpayers will hold the bag if
homeowners default on the refinanced loans. Fannie and Freddie are
essentially backed by the government.
Plus, politicians risk populist unrest over bailout fatigue.
Obama was well aware of the problem facing Nevada’s underwater
homeowners, but not ready to commit to its solution.
“I know one suggestion that has been made is to further drop the equity
requirements,” Obama said Wednesday. “I don’t want to weigh in yet
because I haven’t seen the conclusions from Treasury about how that
would impact the program, if it would cost additional money to
taxpayers in order for us to get the banks to play along with it ... I
just want to see what works within the constraints of the resources
that we have.”
Obama did indicate, however, that bank bailout money is being eyed for
housing — a move supported by Titus, Reid and Rep. Shelley Berkley.
“If those resources are now available and can be recycled in even more
help for homeowners, that’s something that is worth considering,” Obama
said.
Last week Titus, Berkley and other House lawmakers sent a letter to
Geithner saying the additional funding could “help more principal
homeowners in severely affected areas to stay in their homes.”
The legality of reusing the funds has been questioned by other
lawmakers who argue the bank bailout law was more narrowly drafted.
Obama seemed well aware of the potential battle ahead.
“We may need some cooperation with Congress if we end up doing that,”
he said.
“One of the things that we’re having to struggle with is the magnitude
of this recession. The depth of it — starting back in September but
really picking up speed in the first of January — meant that a lot of
the resources were used up very quickly.”
The Treasury Department could not immediately comment on when it will
produce the president’s request for a program evaluation. It could also
not say how many foreclosures have been prevented since the Obama
housing plan was launched.
NOTE: the top
three counties...CT got rid of this level of
government in the late 1950's. AP IMPACT: Foreclosures Add to
Hurricane Hazards
NYTIMES
By THE ASSOCIATED PRESS
May 31, 2009; Filed at 11:53 a.m. ET
LEHIGH ACRES, Fla. (AP) -- Mike Manikchand points toward his neighbors
-- a half-dozen empty, foreclosed-upon homes, sitting on weed-strewn
yards -- and he wonders: What will happen if a hurricane slams into
southwest Florida this year?
His simple answer: ''A lot of these places will get destroyed.''
Unoccupied, these homes would be defenseless in a storm; there will be
no one to put up shutters, batten down garage doors and otherwise
secure homes. But that's not all. Nearby homes and their residents
would also be at risk from wind-propelled debris. Lehigh Acres
and other communities at the epicenter of the nation's housing crisis
are coming to realize that this year's hurricane season, beginning June
1, represents yet another pitfall. Hurricanes could make hazards of
thousands of foreclosed-upon houses, and their diminished value could
decrease even more.
''Here's your choice,'' said Julie Rochman, president of the
Tampa-based Institute for Business and Home Safety. ''Spend a little
bit of time and money to secure the properties to withstand wind and
water or not do the right thing and have the homes become damaged and
are valued less.''
The Associated Press Economic Stress Index -- a month-by-month analysis
of foreclosure, bankruptcy and unemployment rates in more than 3,000
U.S. counties -- confirms that some of the areas most likely to be
stuck by a hurricane are suffering the most in this recession. In
March, there were 281,691 homes in foreclosure in Florida and coastal
counties in Alabama, Georgia, Louisiana, Mississippi, North Carolina,
South Carolina, Texas and Virginia.
Lee County, where Manikchand lives, is among the hardest-hit counties
in the country. A 22-year-old pharmacy student, he took advantage of a
dismal housing market and bought a foreclosed duplex for $36,000.
In coming months, he and millions of others along the Atlantic and Gulf
coasts will dutifully track tropical weather forecasts and stockpile
batteries, flashlights and tins of tuna, hoping that hurricanes blow
harmlessly out to sea. But who will secure all the foreclosed
homes if a storm does approach? No one really knows.
In some cases, a property management company hired by the bank could do
the work. Or it could be a real estate agent, a homeowners' association
or even resourceful neighbors who clear debris from yards and board
windows. Yet no state laws mandate who prepares buildings before a
hurricane; even officials from the Florida Division of Emergency
Management say that securing foreclosures isn't a concern.
''It's not an aspect that we really deal with,'' said John Cherry, the
agency's external affairs director. ''Our No. 1 concern is life
safety.''
Quick evacuation will be the priority, not securing vacant homes, if a
major storm looms, others say. But shutterless homes can be a major
safety hazard in a hurricane. And a region full of destroyed or heavily
damaged homes would depress real estate values even further.
Randall Webster, director of the Horry County Emergency Management
Department in South Carolina, said if a storm does hit, properties in
foreclosure could slow recovery if the county can't immediately find
the owner, ''especially if it were in a neighborhood where others
around it were taking care of business and this one gets in rough
shape,'' he said.
The issue of who cares for vacant homes during a time of crisis seems
simple: The legal owner is responsible for securing the property. But
communities are already struggling to get banks to mow lawns, much less
put up hurricane shutters -- if they weren't swiped from the foreclosed
home, along with appliances, copper wiring and air conditioners.
If the bank hasn't yet taken the title of a home, the property is in a
kind of limbo, and local officials or homeowners associations may have
no legal right to trespass and secure it. And many hard-hit counties
don't have the money or manpower to do it. ''Simple logistics tells me (the
banks) don't have the staff to follow up,'' said Kenneth Wilkinson,
property appraiser for Lee County (FLA), which in March had the
third-highest foreclosure rate in the United States, after California's
Merced County and Nevada's Clark County.
There are some places that are trying to board up windows and batten
down garage doors, although largely to stave off crime. Wellington, in
Palm Beach County, has gone to court to receive the legal OK to board
up homes. And in Cape Coral, city officials have passed an ordinance
that requires the owner of a foreclosed home to pay $150 to register
the address and provide a contact number for the person who will
maintain the property. Palm Beach County Commissioner Burt
Aaronson has asked county attorneys to research whether it is legal to
board up empty homes.
''If we board them up, we're protecting them,'' Aaronson said.
''Hopefully we will be able to keep some of the value up.''
Aaronson contends that the banks don't always maintain the homes and
doesn't expect that they will in the days before a storm -- and if the
county takes over that responsibility, then he wants the banks to pay.
''We want to use the full power we have as a government to levy the
greatest fines that we can to penalize banks for not taking care of the
properties,'' he said.
Horry County's Webster says there might be another way for public
officials to take matters into their own hands.
''If it became deemed a public health issue or public safety hazard,
the county would have some legal recourse to secure it in terms of
making it off limits or safer,'' said Webster, whose county includes
Myrtle Beach and has seen foreclosures rise over the past year.
Some banks say that they have a plan for hurricanes; JP Morgan Chase
says it will use property management companies and bank field employees
to make sure properties are storm-ready. And if the homes are damaged
or destroyed during a storm, said Michael Fusco, a spokesman for JP
Morgan Chase, the bank ''acts just like a homeowner'' and will file an
insurance claim.
Debora Blume, a spokeswoman for Wells Fargo Bank, said her company
hires local real estate agents who have been assigned to market
bank-owned properties to secure homes against hurricane damage.
But one real estate agent in the Fort Myers area said the process of
putting the maintenance work out to bid and then getting approval from
the bank that owns the property might not be workable as a storm bears
down.
''During a hurricane, we need to get out of town, not wait for approval
for funding to secure a building,'' said Suzanne Sherer, president of
the Realtors Association of Greater Fort Myers and the Beaches. ''I
won't have time to get a bid from a handyman.''
In Lee County, metal hurricane shutters cover a few new, unsold homes.
Many empty homes have swing sets in the yard, garbage cans strewn in
the driveway and loose roof tiles, all of which could become
projectiles during a storm. Sherer said it would be
''devastating'' if a powerful storm similar to Hurricane Charley, which
hit nearby Charlotte County in 2004, struck Lee County.
In Galveston, Texas, where more than 17,000 home were damaged by
Hurricane Ike last year, there are still many empty homes -- but not
because of foreclosures. The properties were damaged during the storm
and owners don't have the money to rebuild.
''These homeowners have the biggest hurdles as far as getting back into
their homes,'' City spokeswoman Alicia Cahill said. ''A lot of the
homes that were affected were lower income to moderate income families
who didn't have a huge insurance policy or a lot of extra cash lying
around to make repairs.''
Tybee, Ga., mayor Jason Buelterman says officials there haven't
considered potential problems with foreclosures during storm season.
Their first priority, he said, is assuring the safety of island
residents and tourists if a hurricane heads their way. Dealing with
foreclosed homes will be an afterthought. Yet residents
throughout the hurricane zone are worried, especially those who live in
foreclosure-dotted neighborhoods. Armando Gonzalez, 72, retired from
Miami to Lehigh Acres five years ago.
He and his wife moved to a small home a few blocks from the city
center, in a quiet yet thriving neighborhood. But in the last two
years, his neighbors left, either because of foreclosure or job loss.
Now he's the only one on his block; the home next to him has a broken
window and the one across the street is only half-built. When
asked what would happen to all the nearby, dilapidated homes if a
hurricane hit, Gonzalez shrugged and grinned.
''I can't do anything,'' he said. ''Maybe I'll pray. God will save me.'' Minority Gains in Homeownership
Erode NYTIMES
By JOHN LELAND
May 13, 2009
After a decade of growth, the gains made in homeownership by African
Americans and native-born Latinos have been eroding faster than those
for whites, according to a report released Tuesday by the Pew Hispanic
Center.
The numbers indicate that the gains for minority groups, achieved
between 1994 and 2004, were disproportionately tied to relaxed lending
standards and subprime loan products, and that those gains are now
being reversed. The exception to the pattern was foreign-born
Latinos, whose rate of homeownership, while low, has stalled in the
downturn but has not fallen. Since 2004, homeownership for all
Americans has declined to 67.8 percent from 69 percent. For African
Americans it fell to 47.5 percent from 49.4 percent. Latinos had a
longer period of growth, with homeownership rising until 2006, to 49.8
percent, before falling to 48.9 percent last year. Homeownership for
native-born Latinos fell to 53.6 percent from a high of 56.2 percent in
2005.
The losses for immigrants have been more modest.
For all immigrants, homeownership fell minimally, to 52.9 percent from
53.3 percent in 2006. Latino immigrants, who have the lowest rates of
homeownership among the groups studied, did not lose any ground,
remaining at the high of 44.7 percent that they reached in 2007.
The numbers reflect the changing character of the foreign-born
population, said Rakesh Kochhar, associate director of research for the
Pew Hispanic Center, a project of the nonprofit Pew Research Center.
Immigrants become more financially secure the longer they live in the
country, and since 1995 the typical immigrant’s period of living in the
United States has increased.
“A lot of foreign-born Hispanics have not been in the country for long,
so they’re still on an upward path” compared to the general economy,
Mr. Kochhar said. “The force of assimilation into homeownership is
strong,” even during a downturn.
The decreases in homeownership reflect both high foreclosure rates and
lower rates of home buying, Mr. Kochhar said.
Even with the declines, the rates for all groups remained higher than
before the boom, with nearly 68 percent of Americans owning homes in
2008, up from 64 percent in 1994. “This is a historic expansion, the
biggest since World War II,” Mr. Kochhar said. “There’s been a setback
in last two to three years, but overall everyone is better placed.”
The gaps between whites and minorities remain significant, with
homeownership rates for Asians (59.1 percent), blacks (47.5 percent)
and Latinos (48.9 percent) well below that for whites (74.9 percent).
Like previous studies, the report found that blacks and Hispanics were
more than twice as likely to have subprime mortgages as white
homeowners, even among borrowers with comparable incomes. Only 10.5
percent of white home buyers took out high-cost loans in 2007, compared
to 27.6 percent of Latinos and 33.5 percent of African Americans. These
loans, which typically require little or no down payments and are meant
for borrowers with low credit scores, made homeownership possible for
many black and Hispanic families during the boom years, but also led to
high rates of foreclosure.
“Basically that gap was closed on poor loans that never should have
been made and wound up harming folks and their neighborhoods,” said
Kevin Stein, associate director of the California Reinvestment
Coalition, an organization of nonprofit housing groups.
African Americans and Latinos remain more likely than whites to be
turned down for mortgages, with 26.7 percent of applications from
Hispanics being rejected in 2007; 30.4 percent for blacks; and 12.1
percent for whites. These disparities held even for borrowers whose
incomes were well above average for their area.
Though there are no data on the race or ethnicity of homeowners in
foreclosure, the researchers found that counties with high
concentrations of immigrants had high rates of foreclosure. This
association was even stronger than that between the prevalence of
subprime mortgages and the foreclosure rate.
But the research did not suggest that high rates of immigration cause
high levels of foreclosure on their own, Mr. Kochhar said. High
unemployment, falling house prices, subprime loans and high ratios of
debt to income all contributed to high foreclosure rates. Op-Ed
Contributor: Don’t Let
Judges Fix Loans
NYTIMES
By ALAN SCHWARTZ
February 27, 2009
IN his housing plan, President Obama has asked Congress to give
bankruptcy judges the authority to rework the terms of mortgages and
allow more people to stay in their homes. Though the president’s idea
sounds appealing, there are at least three reasons it is misguided.
First, the proposal would swamp bankruptcy courts. There are only about
300 bankruptcy judges, and they are already busy with an increasing
number of bankruptcies. Clearing millions of new mortgage cases will
take a long time and thus have little immediate effect on the
foreclosure crisis. In addition, the flood of new cases would delay the
resolution of business bankruptcies, to the detriment of the economy.
Second, many debtors will be disappointed. Consider the parties’
incentives. Debtors will argue for low home values while lenders will
argue for the opposite, to minimize their losses. Lenders will win many
of these valuation contests: they have more expertise than individuals
in making their case and greater resources.
Finally, the proposal worsens economic uncertainty. A major cause of
the financial crisis is that many banks do not know what their assets —
and particularly home mortgages — are worth. Valuing homes is simple
when prices are stable. An appraiser can look at prices in a
neighborhood and plausibly infer that a particular house is worth about
as much as similar houses there.
But even experts do not know how to value individual houses when a
large number of them are in default, and thus potentially for sale, and
cash is tight for prospective buyers. Under the president’s proposal,
however, bankruptcy judges who are not experts at valuation would be
required to price individual houses. Valuation thus will likely be a
shot in the dark, inevitably affected by a judge’s personal sympathies.
The arbitrariness of valuing single homes in bankruptcy will further
increase the already considerable uncertainty regarding the value of
the banks’ “toxic assets.”
There are many things that can be done to help debtors retain their
homes. It would help, for instance, to change regulations to let loan
administrators modify mortgages without fear of liability from the
mortgage’s ultimate holders. What won’t help, however, would be to put
bankruptcy judges in the business of reworking bad home loans.
Alan Schwartz is a professor
of law and management at Yale. Homeowners'
Rallying Cry: Produce The
Note. Strategy looks for paperwork glitches, may buy some
time
DAY
By Mitch Stacy , Associated Press
Published on 2/18/2009
Zephyrhills, Fla. - Kathy Lovelace lost her job and was about to lose
her house, too. But then she made a seemingly simple request of the
bank: Show me the original mortgage paperwork. And just like
that, the foreclosure proceedings came to a standstill. Lovelace
and other homeowners around the country are managing to stave off
foreclosure by employing a strategy that goes to the heart of the whole
nationwide mess.
During the real estate frenzy of the past decade, mortgages were sold
and resold, bundled into securities and peddled to investors. In many
cases, the original note signed by the homeowner was lost, stored away
in a distant warehouse or destroyed. Persuading a judge to compel
production of hard-to-find or nonexistent documents can, at the very
least, delay foreclosure, buying the homeowner some time and turning up
the pressure on the lender to renegotiate the mortgage.
”I'm going to hang on for dear life until they can prove to me it
belongs to them,” said Lovelace, a 50-year-old divorced mother who owns
a $200,000 home in Zephyrhills, near Tampa. “I'll try everything I can
because it's all I have left.”
In interviews with The Associated Press, lawyers, advocates and
homeowners outlined the produce-the-note strategy. Exactly how many
homeowners have employed it is unknown. Nor is it clear how successful
it has been; some judges are more sympathetic than others. More
than 2.3 million homeowners faced foreclosure proceedings last year and
millions more are in danger of losing their homes. A study last year of
more than 1,700 bankruptcy cases stemming from foreclosures found the
original note was missing more than 40 percent of the time. Other
pieces of required documentation also were routinely left out.
Chris Hoyer, a Tampa lawyer whose Consumer Warning Network offers the
free court documents Lovelace used, has promoted the produce-the-note
strategy.
”We knew early on that the only relief that would ever come to people
would be to the people who were in their houses,” Hoyer said. “Nobody
was going to fashion any relief for people who have already lost their
houses. So your only hope was to hang on any way you could.”
WWW.CONSUMERWARNINGNETWORK.COM
Tom Deutsch, deputy executive director of the American Securitization
Forum, a group that represents banks, law firms and investors,
dismissed the strategy as merely a stalling tactic, saying homeowners
are “making lawyers jump through procedural hoops to delay what's
likely to be inevitable.”
Deutsch said the original note is almost always electronically retained
and can eventually be found.
Judges are often willing to accept electronic documentation. And
lenders are sometimes allowed to produce other paperwork to establish
they are the holder of a loan. Still, assembling such documents to a
judge's satisfaction takes time, which to homeowners is the
point. Lovelace filed her produce-the-note demand last fall after
the bank acknowledged that her original mortgage document had been lost
or destroyed. Since then, there has been no activity on the foreclosure
- no letters from the lender, no court filings.
The law firm handling the foreclosure for the lender refused to
comment. The first big success of the produce-the-note movement
came in 2007 when a federal judge in Cleveland threw out 14
foreclosures by Deutsche Bank National Trust Co. because the bank
failed to produce the original notes. Michael Silver, a lawyer
for two of the families in that case, said at least one eventually lost
their home. Still, he considers that a success.
”From the perspective of the person who's in the home, you may have
kept them in the house another 10 or 12 months,” he said. “If I can get
a result with economic benefits to a client, then I think I won.”
Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery
speech on the House floor during debate on the federal bank bailout
last month.
”Don't leave your home,” she said. “Because you know what? When those
companies say they have your mortgage, unless you have a lawyer that
can put his or her finger on that mortgage, you don't have that
mortgage, and you are going to find they can't find the paper up there
on Wall Street.”
April Charney, head of foreclosure defense for Jacksonville Area Legal
Aid in Florida, said the strategy has been so successful for her that
she now travels around the country to train other lawyers in how to use
it. She said she has gotten cases delayed for years by demanding that
lenders produce paperwork they cannot find.
”This is an army of lawyers getting out there to stop foreclosures so
we can get to the serious business of creating solutions,” Charney
said. “Nothing good is going to happen as long as we continue to bleed
homeowners.”
Resisting Home Evictions Becomes a Group Effort NYTIMES
By FERNANDA SANTOS
February 18, 2009
As resistance to foreclosure evictions grows among homeowners,
community leaders and some law enforcement officials, a broad civil
disobedience campaign is starting in New York and other cities to
support families who refuse orders to vacate their homes.
The community organizing group Acorn unveiled
the campaign with a spirited rally on Friday at a Brooklyn church and
will roll it out in at least 22 other cities in the coming weeks.
Through phone trees, Web pages and text-messaging networks, the effort
will connect families facing eviction with volunteers who will stand at
their side as officers arrive, even if it means risking arrest.
“You want to haul us out to jail? Fine. Let the world see how
government has been ineffective,” Bertha Lewis, Acorn’s chief
organizer, said in an interview. “Politicians have helped banks, but
they haven’t helped families in the way that it’s needed, and these
families are now saying, enough is enough.”
At the onset of the foreclosure crisis, the problem was regarded by
some as one of a homeowner’s own making, the result of irresponsible
decisions made by families who chose to live beyond their means. But as
foreclosures spread across the country, devastating even solidly
middle-class communities, the blame has slowly shifted to the financial
companies that made questionable loans and have received billions of
dollars in federal aid to stave off collapse.
In recent months, a budding resistance movement has grown among
Americans who believe they have been left to face their predicament on
their own — and the Acorn campaign is an organized expression of that
frustration, Ms. Lewis said. Instead of quietly packing up and turning
their homes over to banks, homeowners are now fighting back.
On Feb. 9, a man scrawled a message on the roof of his house in a
suburb of Los Angeles: “I Want 2 Be Heard.” Then he barricaded himself
inside when deputies showed up to evict him, surrendering after a few
hours. In October, a woman in San Diego chained herself to her front
porch after the bank that held her mortgage refused to renegotiate the
terms. She remains in her home, but has received a second eviction
notice.
And last year in Boston, neighbors and activists locked arms outside
eight buildings that had been foreclosed upon to prevent the
authorities from forcing residents onto the streets.
Sheriffs in some places have also taken a stand. In Wayne County in
Michigan, Sheriff Warren C. Evans, suspended all evictions starting
Feb. 2 until the federal government implements a plan to help
homeowners facing foreclosures.
In Cook County in Illinois, which includes Chicago, Sheriff Thomas J.
Dart directed a lawyer to review all eviction orders to protect people
who kept on paying rent after the buildings where they lived had been
seized by banks. In Butler County in Ohio, Sheriff Richard K. Jones
ordered his deputies not to evict people who had no place else to go.
“This is a cold place in the winter and I will not give people a death
sentence for not paying their debts,” Sheriff Jones said in an
interview. “These are human beings, responsible middle-class people who
fell on hard times, and I just can’t toss them out onto the streets.”
Acorn’s strategy is modeled on a movement the group led in the 1980s,
when squatters occupied and set out to renovate thousands of abandoned
city-owned buildings in New York, Philadelphia and Detroit, among other
cities. The motivation was to solve what Ms. Lewis has called “the
working family’s housing crisis.”
In cities like Orlando, Fla., which has one of the nation’s highest
foreclosure rates — and Boston, Houston, Baltimore, Oakland, Calif.,
and Tucson, Ariz. — Acorn organizers have been creating networks to
alert a homeowner’s neighbors when an eviction has been scheduled or
deputies are on the way. Some volunteers will summon friends and
relatives to converge at the home, while others will be in charge of
notifying the news media. Organizers are also recruiting lawyers
willing to defend for no fee those who are arrested.
The campaign, called Home Defenders, enlisted about 500 participants
during meetings held Friday and Saturday in New York and five other
cities. Ms. Lewis and other organizers said that they believed the
number will reach into the tens of thousands within weeks.
“This is a desperate, last-ditch effort by folks who are working two or
three jobs, single mothers, elderly people who don’t know what else to
do to save their homes,” said Ginny Goldman, Acorn’s lead organizer in
Texas, where the campaign began in Houston on Saturday.
The rally in Brooklyn, at Brown Memorial Baptist Church in Fort Greene,
drew about 150 people. There were homeowners, Acorn members, community
advocates and candidates for the City Council. One councilman, Mathieu
Eugene, was carrying a slab of papers as thick as a large dictionary,
each sheet representing, he said, a family facing foreclosure in his
district, which includes parts of Crown Heights, Flatbush and
Kensington.
The church’s pastor, the Rev. Clinton M. Miller, opened the gathering
with this prayer: “If anybody here is facing foreclosure, God, we ask
that a miracle be made and a home be saved.”
Then, between homeowners’ sharing their plight, the crowd chanted,
“Enough is enough.”
One homeowner, Myrna Millington, 73, who lives in Laurelton, Queens,
said that she had to take a second mortgage on her home of 38 years to
pay for repairs that turned out to more extensive than originally
planned. What Ms. Millington did not know was that she had signed for a
subprime loan, which carried interest rates so high she could not keep
up with the payments. Her house was foreclosed on in September.
“I may lose my home, but I’m only leaving in handcuffs,” Ms. Millington
said.
Another homeowner, Denise Parker, a mother of three who works as a
housekeeper at two Midtown Manhattan hotels, bought a home in
Springfield Gardens, Queens, in 2005 with an adjustable interest rate
that, after two years, went up every six months. Her payments started
at $3,500 and now are $5,050 a month, she said. She fell behind last
year and her house is scheduled to be auctioned off on Friday.
“I refuse to leave the home that I’ve worked so hard to keep,” Ms.
Parker, 42, told the audience. “I will not let the bank take my home
and I will not leave.”
Eviction resistance actions are scheduled for Thursday in cities
including New York, Oakland and Houston. Organizers will try to recruit
enough volunteers to form a human wall on the sidewalk to avoid being
arrested for trespassing. But occupying a house or having people attach
themselves to a home could also be a tactic.
The campaign has earned praise and raised concern. Sheriff Dart, in
Illinois, said it was a “slippery slope when you have individuals
deciding whether they can lawfully remain in their homes.”
Sheriff Jones, in Ohio, equated the planned resistance to “chaining
yourself to a tree that’s about to be cut down” and said that though he
may not agree with it, he sympathizes.
In Washington, Acorn has found a staunch supporter in Representative
Marcia C. Kaptur of Ohio, who, during a discussion last month about the
$700 billion bailout package for financial companies, took to the floor
of the House and instructed people to “stay in your homes — if the
American people, anybody out there, is being foreclosed, don’t leave.”
In an interview, Ms. Kaptur said, “I’m thrilled that the American
people are rising up and exercising the power that Wall Street has
taken away from them.” Construction spending jumps 2.7
percent in April
YAHOO
By MARTIN CRUTSINGER, AP Economics Writer
1 June 2010
WASHINGTON – Construction activity surged in April by the largest
amount in nearly a decade. The unexpected gains could mean the
hardest-hit sector of the economy is starting to recover.
Construction shot up 2.7 percent last month compared to March, the
Commerce Department said Tuesday. It was the biggest one-month
improvement since August 2000. Housing
construction jumped by 4.4 percent to a seasonally adjusted annual rate
of $263 billion. Home construction has been helped by home buyer tax
credits that expired at the end of April. Economists are concerned
about the durability of the housing recovery now that the tax credits
have expired.
Nonresidential construction rose 1.7 percent in April to an annual rate
of $302.7 billion. That marked the first advance in this category since
March 2009. The strength in April came from gains in private sector
work on communications projects and power generation facilities.
Construction of office buildings and the category that includes
shopping centers fell in April.
Commercial building projects have suffered as the weak economy has
resulted in rising loan defaults and banks have tightened up on lending
standards. That has made it harder for developers to get financing.
In another sign of strength, the government revised the March
performance to show a gain of 0.4 percent, double the 0.2 percent
increase initially reported.
Government spending rose 2.4 percent in April to $303.3 billion. State
and local spending increased 2.3 percent and federal spending rose 2.9
percent. This category is being helped by the government's economic
stimulus program but those projects are starting to wind down.
Weakness in construction has been a major drag on the economy as it
tries to mount a sustained recovery from the deepest recession since
the 1930s. PRICES
Most homes
being built new lately are multifamily units for rentals...prices going
down for new homes?
New-home sales on the rebound, increasing 11.1 percent in March By STEVE GOLDSTEIN MarketWatch Article published Apr 26, 2011
Sales of new homes rose 11.1 percent in March, the Commerce Department
said Monday, marking a mild improvement from the worst-ever showing as
the dampening effect of winter storms and an expiring California tax
credit wore off.
The still-bleak reading of a seasonally adjusted annual rate of 300,000
represented a 21.9 percent nosedive from March 2010 levels.
However, the level beat a MarketWatch-compiled economist estimate of
290,000, and February's low reading of 250,000 was revised up to
270,000. Analysts had attributed February's weakness in part to
winter storms that depressed figures in the East and the Midwest, as
well as the expiration of a California tax credit. The data in March
bore out that view.
Sales in the Northeast jumped 66.7 percent, those in the Midwest
improved 12.9 percent and those in the West increased 25.9 percent,
while sales in the South edged 0.6 percent lower.
"With March sales gaining in every region except the South, the data
are another reminder that activity readings in January/February were
restrained by severe weather. Builder sentiment data and mortgage
purchase applications have shown no collapse or subsequent surge," said
Steven Wieting, an economist at Citi.
But by region, sales are between 9.1 percent and 34 percent worse than
the same period last year. The still-high unemployment rate, a glut of
cheaper existing homes on the market and the large number of underwater
mortgages have all combined to depress the market for new homes.
"Distressed sales continue to rob demand from new home sales and
construction activity," said Yelena Shulyatyeva, an economist at BNP
Paribas.
On a three-month moving average, which reduces the month-to-month
variance in the hugely volatile release, sales fell to a 294,000 rate
from 305,000. The March reading has a margin of error of 21.7 percent,
the Commerce Department said. The median sales price rose 2.9
percent to $213,800 from an upwardly revised $207,700 in February,
though they are 4.9 percent below selling prices from March 2010.
The average sales price actually fell 3.8 percent to $246,800, as the
number of houses sold in the $400,000-to-$499,000 range dropped to 4
percent of the total from 9 percent of February's total. At the
end of March, 183,000 houses were up for sale, representing a supply of
7.3 months at the current sales rate, down from a supply of 8.2 months
in February.
Inventories are now at the smallest level since 1967 after a
"relentless slide," said David Resler, chief economist of Nomura
Securities International.
"This lean supply of unsold homes may give builders some hope (however
faint) that a pickup in sales will require new construction," he said.
Home prices fall for 8th month in
February: S&P/Case YAHOO
26 April 2011
NEW YORK (Reuters) – U.S.
single-family home prices fell for an eighth straight month in
February, inching closer to an April 2009 trough, a closely watched
survey said on Tuesday.
The S&P/Case Shiller composite
index of 20 metropolitan areas declined 0.2 percent in February from
January on a seasonally adjusted basis, slightly better than
economists' median forecast for a drop of 0.3 percent.
The 20-city composite index was at
139.27, holding just a hair above its 2009 low of 139.26. Average home
prices across the United States are back to levels where they were in
the summer of 2003. Prices
in the 20 cities have fallen 3.3 percent year over year, in line with
expectations.
"There is very little, if any, good
news about housing. Prices continue to weaken, trends in sales and
construction are disappointing," David Blitzer, chairman of the Index
Committee at S&P Indices, said in a statement.
"Recent data on existing-home sales,
housing starts, foreclosure activity and employment confirm that we are
still in a slow recovery."
The glut of houses up for sale has
kept prices low and the market has struggled to regain traction since a
home buyer tax credit expired last spring. Other data in the last week has suggested
some stabilization in the market with sales of new and existing homes
rising in March.
Financial markets were unchanged by
the Case-Shiller data on Tuesday, with U.S. stock index futures
pointing to a higher open with investors focused on earnings from major
companies. Home
prices fell in August, near lows YAHOO
By Julie Haviv
26 October 2010
NEW YORK (Reuters) – Prices of
single-family homes fell for a second straight month in August,
hovering around recent lows after the expiration of popular homebuyer
tax credits, according a Standard & Poor's/Case-Shiller home price
report on Tuesday.
The S&P/Case Shiller composite
index of 20 metropolitan areas declined 0.3 percent in August from July
on a seasonally adjusted basis where a Reuters poll of economists
forecast a drop of 0.2 percent. The dip followed a seasonally adjusted
decline of 0.2 percent in July.
S&P, which publishes the
indexes, also said home prices in the 20 cities index rose 1.7 percent
from August 2009, a slower annual pace than the 3.2 percent increase in
July.
Unadjusted for seasonal impact, the
20-city index fell 0.2 percent after a 0.6 percent July gain. A 0.2
percent rise was expected.
"A disappointing report. Home prices
broadly declined in August. Seventeen of the 20 cities and both
composites saw a weakening in year-over-year figures, as compared to
July, indicating that the housing market continues to bounce along the
recent lows," David M. Blitzer, chairman of the index committee at
Standard & Poor's, said in a statement.
"Over the last four months both the
10- and 20-City Composites show slowing growth, after sustaining
consistent gains since their April 2009 troughs," he said.
Blitzer said the housing market
appears to have stabilized at new lows.
"At this time, it does not seem that
any of the markets are hanging on to the temporary momentum caused by
the homebuyers' tax credits," he said.
The housing market has been
struggling since home buyer tax credits expired earlier this year. To
take advantage of the tax credits, buyers had to sign purchase
contracts by April 30. Contracts originally had to close by June 30,
but that was extended by three months.
Cary Leahey, economist at Decision
Economics in New York, said the problem right now is the potential
shadow inventory of foreclosures. With a flood of foreclosures, which
typically sell at steep discounts, in the pipeline, home prices will
likely remain depressed for some time.
"If you believe that you can't have
a vibrant economy without a vibrant housing market, then you have to
deal with the foreclosure problem," he said.
Home prices in August reflect
conditions before banks temporarily halted foreclosures due to
questionable documentation. Home prices may benefit from fewer
foreclosures in the mix, but any rise should prove to be temporary.
As of August 2010, average home
prices across the United States are back to the levels where they were
in late 2003 and early 2004, S&P said. Supply and demand as relates to prices
- our introduction of this basic economic theory.
Housing isn’t close to stabilizing Commentary: Shadow
inventory paints a more dismal outlook By Keith Jurow is a Minyanville.com
contributor Sept. 22, 2010, 10:48 a.m. EDT
BRIDGEPORT, Conn. (MarketWatch) — Much has been written about the
so-called “shadow inventory” since the term was first coined a few
years ago.
Some analysts and commentators have argued about whether it even
exists. Let’s take an in-depth look at this shadow inventory and see
whether it really is a threat to housing markets around the country.
Shadow inventory defined
Rather than joining the dispute about what the term actually means,
I’ll simply define it in this way: The “Shadow Inventory” is comprised
of all those distressed residential properties (other than MLS
listings) which we know will almost certainly be coming onto the market
in the not-too-distant future.
MLS foreclosures — the tip of the
iceberg
The starting point in discussing the shadow inventory has to be homes
actually on MLS listings around the country. With the plunge in home
sales starting in July, the number of listings has risen substantially
since the spring. For example, California listings are up 25% since
April.
The percentage of total listings that are bank-owned properties has
declined over the last year, while the percentage of short-sale
listings has risen tremendously during the same period. For example,
short sales comprised 40% of all active listings in Sacramento County
in August. The following table from data supplied by ZipRealty shows
this soaring number of short-sale listings.
Because of the sharp climb in short-sale listings, roughly 30% of all
July home sales in California, Arizona, and Nevada were short sales,
according to Inside Mortgage Finance. It also reported that nationwide,
closed short sales have climbed from roughly 45,000 in January to
nearly 100,000 in June.
With regard to shadow inventory, the key question is how many
foreclosed and repossessed properties are now either in the inventory
of banks or held on behalf of residential mortgage-backed securities
investors whose loans they service. Estimates start at about 500,000
and go up from there. One highly reputable data provider with a huge
database of first mortgage liens has been reporting an REO inventory in
excess of 1 million since last summer. Whatever the number is, it seems
clear that the vast majority of these properties aren’t currently on
the market.
Defaulted properties heading for
resale market
In addition to repossessed properties held off the market, the shadow
inventory includes all the homes that have been placed into default —
the first stage of foreclosure proceedings. According to Lender
Processing Services’s July Mortgage Monitor report, there are now 2.02
million properties in default. This number hasn’t declined in the past
year in spite of more than 1 million trial mortgage modifications. Read
Minyanville’s “Federal Reserve Slowly Killing Mortgage Market.”
In many of the worst bubble metros, the number of homes in default has
been climbing in the last year. Take a look at the soaring number of
defaults in the Las Vegas metro area in this graph from
ForeclosureRadar. In spite of the huge number of foreclosed homes that
have been sold by the banks in the Las Vegas area, the volume of new
foreclosure actions continues to rise. See chart with Las Vegas
defaults.
While many of these defaulted properties throughout the nation will
escape foreclosure by means of a short sale, the rest will move on to
foreclosure proceedings and eventual trustee sale to a third party or
repossession by the lender.
Overwhelmed by the number of defaulted properties, banks have stretched
out the time between the beginning of mortgage delinquency and formal
foreclosure to an incredible average of 469 days -- more than 15
months. Since these homeowners in default are living in their house
without making mortgage payments, that’s a way to build up a sizable
pile of cash. Read Minyanville’s “What to Do With Fannie and Freddie?”
Delinquent homeowners — the number
just keeps growing
You could argue that the shadow inventory is the total of repossessed
homes not yet on the market and defaulted homes that will move into
foreclosure. However, there’s also the matter of homes which are
seriously delinquent in mortgage payments. Why? The homeowner can cure
the delinquency by paying the arrears before the home goes into default.
The problem is that the cure rate for these seriously delinquent
mortgages is almost zero. See the chart here.
If this were early 2005, one could claim that 40% of homeowners who
were delinquent 90 days or longer would eventually bring the mortgage
current. But the cure rate has plunged along with home prices. As early
as one year ago, the cure rate had dropped to almost zero. A
delinquency of 90 days now means almost certain foreclosure or short
sale.
How many homeowners are now seriously delinquent by 90 days or more? To
answer that, we turn to Lender Processing Services and its massive
database of roughly 34 million first mortgages. Their monthly Mortgage
Monitor provides a detailed table of non-performing first liens. Here’s
what the July non-performing loan count looks like.
At the end of July, the number of residential first mortgages that were
delinquent by 90 days or more stood at 2.47 million. While the figure
has declined from a record 3.06 million in January of this year, this
is due almost entirely to the mortgages that were placed in trial
modification by the banks. While in modification, they’re no longer
considered delinquent. We know from the cure rate chart shown earlier
that nearly all of these seriously delinquent mortgages are headed for
the resale market either through a short sale or foreclosure.
To these 90-day delinquencies we need to add first mortgages that are
delinquent for at least 60 days. The chart above reports 761,000 of
these 60-day delinquencies. The cure chart shows us that the vast
majority of these delinquent properties will also end up on the resale
market.
Finally, we must also include those mortgages that are newly delinquent
for 30 days. That number has been stuck at roughly 1.8 million for the
last three months. Now, you may question the inclusion of these newly
delinquent loans. Keep in mind, though, that the vast majority of those
homeowners who become 30 days delinquent have been delinquent before,
according to Lender Processing Services figures. The cure rate chart
shows us that only 30% of those borrowers who go into arrears by at
least 30 days will cure the loan without lapsing into delinquency again
and eventually falling into default.
Concentration of the shadow inventory in 25 major metros
It’s very important to understand that this enormous shadow inventory
of distressed properties that will eventually be thrown onto the resale
market is heavily concentrated in a limited number of metros. According
to data provided by Lender Processing Services, 52% of the nationwide
90-day delinquencies and 58% of the defaults are concentrated in 25
major metros. The table shows this concentration.
If you look carefully at the distressed property figures for the top
four metros, you’ll see that the number of residences that will be
pouring onto their housing markets in the next one to two years is
enormous. Anyone who thinks that prices have bottomed in the Miami, New
York, Los Angeles, or Chicago metro areas had better take a good, hard
look at these statistics.
Tallying up the shadow inventory
An incredible 14% of the nearly 54 million first liens in the country
are now either delinquent or in default. This chart from the Calculated
Risk blog shows the steady growth since 2005.
To come up with a total for the shadow inventory, let’s first add the
total number of loans in default to those delinquent 90 days or more
since we know that these loans are headed for foreclosure or a short
sale. That comes to 4.5 million properties. Based on the cure rate for
loans delinquent at least 60 days, we’ll add 95% of those 60-day
delinquencies. That is an additional 723,000 residences. For the same
reason, we’ll add 70% of those delinquent for at least 30 days — 1.25
million properties.
And, of course, let’s not forget the REOs that haven’t yet been placed
on MLS listings by the bank servicers. We’ll be conservative and
estimate them at 500,000.
Adding all of these together, we come up with a total of roughly 6.97
million residences that are almost certainly going to be thrown onto
the resale market as distressed properties at some point in the
not-too-distant future. This massive number of homes will put enormous
downward pressure on sale prices. To believe that prices are firming
now is to completely ignore this shadow inventory. Ignore it at your
own risk. Read Minyanville’s “Housing Isn’t Really Dead.”
And foreclosure activity in the
state last month was down more than 62 percent from January of last
year, according to numbers reported by California-based RealtyTrac.
This placed the state's foreclosure rate of 1 in every 1,727 housing
units as among the best nationally, with a ranking of No. 39.
Nationwide, 1 in every 497 housing
units received a foreclosure notice in January. The national
foreclosure totals were up 1 percent from December but down 17 percent
compared with January of last year.
"We've now seen three straight
months with fewer than 300,000 properties receiving foreclosure
filings, following 20 straight months where the total exceeded
300,000," said James Saccacio, chief executive officer of RealtyTrac,
in a statement. "Unfortunately this is less a sign of a robust housing
recovery and more a sign that lenders have become bogged down in
reviewing procedures, resubmitting paperwork and formulating legal
arguments related to accusations of improper foreclosure processing."
Only 47 homes in New London County
were cited in foreclosure filings last month, and 15 of them were in
Norwich. Groton and
Ledyard accounted for five each.
The region's foreclosure filings of
1 in every 2,457 housing units was lower than the state average. And
its total foreclosures fell far below New Haven County's 249, Hartford
County's 219 and Fairfield County's 189.
California, Florida, Michigan,
Arizona and Texas had the highest number of foreclosure filings
nationwide last month.
Earlier this year, RealtyTrac
predicted that foreclosure filings this year nationwide would likely
top 2010's record total of 3.8 million. Foreclosures
may have hit bottom in region Rate still
going up, but worst cases declining
By Lee Howard New London Day Staff Writer
Article published Dec 6, 2010
Foreclosure rates in the Norwich-New London area
continue to rise, but serious mortgage delinquencies are declining,
leading some to predict that the worst of the housing crisis locally
may be over.
"Unless there's another big hit in the economy, I think we're at the
bottom," said Barbara Crouch, a former housing counselor for
Norwich-based Catholic Charities who still does volunteer work for the
organization.
New data from the real estate tracker CoreLogic show that September's
local foreclosure rate of 2.87 percent is up nearly a third from a 2.19
percent rate during the same month last year. Despite the increase, the
Norwich-New London area still has lower foreclosure rates than
Connecticut and the nation as a whole. Crouch pointed to another
key
piece of data: The percentage of mortgages 90 days or more delinquent,
while up from last year, has shown a slow but steady decline over the
past six months.
Crouch, finance director for the Town of Griswold and a former bank
officer, said she looks at the numbers for mortgages 30, 60 and 90 days
delinquent, because they are a bellwether of future foreclosures. And
what she's seeing now gives her hope for 2011. She said the
foreclosure numbers in Connecticut are actually a bit inflated these
days, because they compare a time when the state was actively trying to
stall home takeovers to a period when banks are trying to push
paperwork through as quickly as possible.
"It seems as if everyone who could have possibly lost their home has
done so," she said.
Jeff Gentes, foreclosure-prevention staff attorney at the Connecticut
Fair Housing Center, is not quite as optimistic as Crouch about
foreclosures in the region, but he doesn't expect any sort of spike in
2011. The foreclosure situation could get better, he added, with
the
passage of a $1 billion federal program that offers direct help from
the U.S. Department of Housing and Urban Development of up to $50,000
per homeowner for those in danger of losing their homes. He said nearly
$33 million already has been allocated to Connecticut residents under
the Emergency Homeowners' Loan Program, which might help up to 1,000
families avoid foreclosure.
Assistance is available for up to two years, and the loans can be
forgiven if residents are able to stay in their homes for five years or
more, Gentes said.
"That's real assistance," he added.
But Gentes and Crouch both worry that the region's reliance on
employment at local casinos could keep the spigot of foreclosures
flowing - especially if Foxwoods and Mohegan Sun are forced to compete
with gaming in Massachusetts. Gentes added that foreclosures
could
also be affected by Mashantucket Pequot tribal members losing their
stipends from gaming revenues after the first of the year.
"These things that you read about are going to translate into economic
hardship," he said. "I think the housing market is going to be flat for
another five years."
The good news, according to Crouch, is that Catholic Charities is
seeing a decline in the number of people seeking housing counseling.
Yet this might be the best time to look into a mortgage modification,
she said, because banks are wary of holding onto real estate in an era
of wobbly values, especially in distressed areas such as Norwich and
New London.
"The deals are easier, and the banks have their systems in place now,"
she said.
Those involved in the foreclosure process, though, say the state's
foreclosure mediation program has not been terribly effective in
forestalling housing delinquencies. The mediations may delay
foreclosures for a few months, according to Crouch and others, but
banks usually end up deciding that homeowners will still not be able to
afford their mortgages, even with a modification.
"I've never met anyone who got a good mediation," said New London
attorney Matthew Berger. Don’t
Just Tell Us. Show Us That You Can Foreclose. NYTIMES
By GRETCHEN MORGENSON November
27, 2010 AFTER examining their foreclosure
practices for flaws in mortgage documentation and other procedures,
many of the nation’s largest banks have resumed — or will soon resume —
trying to evict defaulted borrowers. JPMorgan Chase, for example, told
investors this month that it had extensively reviewed its foreclosure
controls, trained personnel in the unit and started new procedures to
ensure that all legal requirements would be met when it moves to seize
a property in default.
“If we find any foreclosures in
error, we will fix them,” JPMorgan Chase said.
But while banks may have booted a
few robo-signers and tightened up some lax procedures, one question at
the heart of the foreclosure mess refuses to go away: whether
institutions trying to take back a property can prove they even have
the right to foreclose at all. Some in the industry believe that
questions about this issue — known as “legal standing” — are trivial.
They say it’s just a gambit by borrowers’ lawyers to throw sand in the
foreclosure machine. Nine times out of 10, bankers say, the right
institutions are foreclosing on the right borrowers.
Maybe so. But the United States
Trustee Program, the unit of the Justice Department charged with
overseeing the integrity of the nation’s bankruptcy courts, is taking a
different view. The unit is stepping up its scrutiny of the veracity of
banks’ claims against borrowers, and its approach is evident in two
cases in federal bankruptcy court in Atlanta. In both cases, Donald F. Walton, the
United States trustee for the region, has intervened, filing motions
contending that the banks trying to foreclose have not shown they have
the right to do so.
The matters involve borrowers
operating under Chapter 13 bankruptcy plans overseen by the court in
the Northern District of Georgia. In both cases, the banks have filed
motions with the bankruptcy court to remove the automatic foreclosure
stay that results when a court confirms a debtor’s Chapter 13 repayment
plan. If the stay is removed, the banks can foreclose. In one case, the borrower had her Chapter
13 plan confirmed by the court early last month. About two weeks later,
Wells Fargo asked the court for relief from the stay so that it could
foreclose.
Responding on Nov. 16, Mr. Walton
asked the court to deny the bank’s request because it had failed to
produce any facts showing that it was entitled to foreclose — either as
the holder of the underlying note or as the agent for the holder.
The other case involves a
couple who had their Chapter 13 plan confirmed by the court in March
2009. A month ago, Chase Home Finance, a unit of JPMorgan Chase, asked
the court for relief from the automatic stay so that it could start
foreclosure proceedings.
Again, Mr. Walton objected, asking
the court to deny the request on the same grounds as argued in the
Wells Fargo matter — in this case, that Chase hadn’t proved that it
controlled the note on the property. Jane Limprecht, a spokeswoman for the
trustee program, confirmed that it was ratcheting up its scrutiny on
banks’ foreclosure practices.
“The United States Trustee Program
is engaged in an enhanced review of mortgage servicer filings in
bankruptcy cases to help ensure the accuracy of the claim to
repayment,” she said. She declined to comment on specific filings.
A Chase spokesman said the bank is
the holder of the note in the Georgia case, giving it standing to file
the motion. A
spokeswoman for Wells Fargo said that in its case, it is the trustee of
a mortgage security that contains the loan, not the servicer. In its
capacity as the trustee for mortgage loans serviced by others, it says
it expects those servicers to abide by all required laws, processes and
procedures. Howard D.
Rothbloom, a lawyer in Atlanta who represents borrowers in bankruptcy,
welcomed the actions by Mr. Walton and said he believes they show a sea
change in the United States trustee’s thinking on the foreclosure mess.
“Until now, what we had was
homeowners complaining about a lack of due process,” Mr. Rothbloom
said. “Now you have the federal government complaining about the abuse
of the judicial process. That’s really what was missing before.”
The judges overseeing these matters
have not yet ruled on the banks’ or the trustee’s requests. And Wells
Fargo and Chase may indeed be able to persuade the trustee that their
filings were proper. But
the trustee’s intervention in these matters indicates that it wants
banks to show the courts that they have the right to foreclose, rather
than simply telling them they do. That had been the custom, after all.
Now, Mr. Walton’s motions may serve as a warning to banks that they
need to be better prepared if they want to foreclose on a borrower.
“For years, the trustee would always
take the creditors’ side,” Mr. Rothbloom said. “My strong opinion is
the U.S. trustee’s perspective is that they exist to stop borrowers
from cheating banks. Perhaps they are coming to the realization that
banks can also cheat borrowers.”
FEDERAL trustees in other parts of
the country have also intervened in borrower cases, but many of these
actions have been related to questionable foreclosure fees or to
dubious legal or documentation practices. The shift to a broader focus
on the issue of standing suggests that the courts may no longer accept
at face value the banks’ arguments that they have the right to
foreclose or represent the institution that does. David Shaev, a lawyer in New York who
works with troubled borrowers, says the United States trustee there has
also intervened in one of his cases, taking up the issue of a bank’s
right to foreclose.
In his experience, Mr. Shaev said:
“The attorneys who represent the banks invariably state that they will
get the collateral file for us and prove that the banks had possession
of the documents at the appropriate time. But then when we review the
file it doesn’t show that at all.”
As many large banks renew their
foreclosure efforts, Mr. Rothbloom says he hopes that the United States
trustee will bring about a comprehensive change in bank practices.
“I’ve gotten resolutions for clients
in individual cases, but I’m just a flea on the tail of an elephant,”
he said. “Resolutions of individual cases don’t bring about systemic
change.”
And systemic change is precisely
what’s needed. Bankers
Ignored Signs of Trouble on Foreclosures
By ERIC DASH and NELSON D. SCHWARTZ, NYTIMES
October 14, 2010 (TIMES corrected mistake from Oct. 13th)
At JPMorgan Chase & Company, they were derided as “Burger King
kids” — walk-in hires who were so inexperienced they barely knew what a
mortgage was. At Citigroup and GMAC, dotting the i’s and crossing
the
t’s on home foreclosures was outsourced to frazzled workers who
sometimes tossed the paperwork into the garbage. And at Litton
Loan
Servicing, an arm of Goldman Sachs, employees processed foreclosure
documents so quickly that they barely had time to see what they were
signing.
“I don’t know the ins and outs of the loan,” a Litton employee said in
a deposition last year. “I’m not a loan officer.”
As the furor grows over lenders’ efforts to sidestep legal rules in
their zeal to reclaim homes from delinquent borrowers, these and other
banks insist that they have been overwhelmed by the housing
collapse.
But interviews with bank employees, executives and federal regulators
suggest that this mess was years in the making and came as little
surprise to industry insiders and government officials. The issue
gained new urgency on Wednesday, when all 50 state attorneys general
announced that they would investigate foreclosure practices. That news
came on the same day that JPMorgan Chase acknowledged that it had not
used the nation’s largest electronic mortgage tracking system, MERS,
since 2008.
That system has been faulted for losing documents and other sloppy
practices. The root of today’s problems goes back to the boom
years,
when home prices were soaring and banks pursued profit while paying
less attention to the business of mortgage servicing, or collecting and
processing monthly payments from homeowners. Banks spent billions
of
dollars in the good times to build vast mortgage machines that made new
loans, bundled them into securities and sold those investments
worldwide. Lowly servicing became an afterthought. Even after the
housing bubble began to burst, many of these operations languished with
inadequate staffing and outmoded technology, despite warnings from
regulators.
When borrowers began to default in droves, banks found themselves in a
never-ending game of catch-up, unable to devote enough manpower to
modify, or ease the terms of, loans to millions of customers on the
verge of losing their homes. Now banks are ill-equipped to deal the
foreclosure process.
“We waited and waited and waited for wide-scale loan modifications,”
said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance
Corporation, one of the first government officials to call on the
industry to take action. “They never owned up to all the problems
leading to the mortgage crisis. They have always downplayed it.”
In recent weeks, revelations that mortgage servicers failed to
accurately document the seizure and sale of tens of thousands of homes
have caused a public uproar and prompted lenders like Bank of America,
JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt
foreclosures in many states. Even before the political outcry,
many of
the banks shifted employees into their mortgage servicing units and
beefed up hiring. Wells Fargo, for instance, has nearly doubled the
number of workers in its mortgage modification unit over the last year,
to about 17,000, while Citigroup added some 2,000 employees since 2007,
bringing the total to 5,000.
“We believe we responded appropriately to staff up to meet the
increased volume,” said Mark Rodgers, a spokesman for Citigroup.
Some industry executives add that they’re committed to helping
homeowners but concede they were slow to ramp up. “In hindsight, we
were all slow to jump on the issue,” said Michael J. Heid, co-president
of at Wells Fargo Home Mortgage. “When you think about what it costs to
add 10,000 people, that is a substantial investment in time and money
along with the computers, training and system changes involved.”
Other officials say as foreclosures were beginning to spike as early as
2007, no one could have imagined how rapidly they would reach their
current level. About 11.5 percent of borrowers are in default today, up
from 5.7 percent from two years earlier.
“The systems were not ever that great to begin with, but you didn’t
have that much strain on them,” said Jim Miller, who previously oversaw
the mortgage servicing units for troubled borrowers at Citigroup, Chase
and Capitol One. “I don’t think anybody anticipated this thing getting
as bad as it did.”
Almost overnight, what had been a factorylike business that relied on
workers with high school educations to process monthly payments needed
to come up with a custom-made operation that could solve the problems
of individual homeowners. Gregory Hebner, the president of the MOS
Group, a California loan modification company that works closely with
service companies, likened it to transforming McDonald’s into a gourmet
eatery. “You are already in chase mode, and you never catch up,” he
said.
To make matters worse, the banks had few financial incentives to invest
in their servicing operations, several former executives said. A
mortgage generates an annual fee equal to only about 0.25 percent of
the loan’s total value, or about $500 a year on a typical $200,000
mortgage. That revenue evaporates once a loan becomes delinquent, while
the cost of a foreclosure can easily reach $2,500 and devour the meager
profits generated from handling healthy loans.
“Investment in people, training, and technology — all that costs them a
lot of money, and they have no incentive to staff up,” said Taj Bindra,
who oversaw Washington Mutual’s large mortgage servicing unit from 2004
to 2006.
And even when banks did begin hiring to deal with the avalanche of
defaults, they often turned to workers with minimal qualifications or
work experience, employees a former JPMorgan executive characterized as
the “Burger King kids.” In many cases, the banks outsourced their
foreclosure operations to law firms like that of David J. Stern, of
Florida, which served clients like Citigroup, GMAC and others. Mr.
Stern hired outsourcing firms in Guam and the Philippines to help.
The result was chaos, said Tammie Lou Kapusta, a former employee of Mr.
Stern’s who was deposed by the Florida attorney general’s office last
month. “The girls would come out on the floor not knowing what they
were doing,” she said. “Mortgages would get placed in different files.
They would get thrown out. There was just no real organization when it
came to the original documents.”
Citigroup and GMAC say they are no longer giving any new work to Mr.
Stern’s firm.
In some cases, even steps that were supposed to ease the situation,
like the federal program aimed at helping homeowners modify their
mortgages to reduce what they owed, had actually contributed to the
mess. Loan servicing companies complain that bureaucratic requirements
are constantly changed by Washington, forcing them to overhaul an
already byzantine process that involves nearly 250 steps.
This article
has been revised to reflect the following correction:
Correction:
October 14, 2010
A photo caption
with an earlier version of this article referred incorrectly to
documents related to foreclosures. They are depositions from
robosigners, not lawsuits. Banks
seize 288K homes in Q3, but challenges await YAHOO
By ALEX VEIGA, AP Real Estate Writer
14 October 2010
LOS ANGELES – Lenders seized more
U.S. homes this summer than in any three-month stretch since the
housing market began to bust in 2006. But many of the foreclosures may
be challenged in court later because of allegations that banks evicted
people without reading the documents.
A total of 288,345 properties were
lost to foreclosure in the July-September quarter, according to data
released Thursday by RealtyTrac Inc., a foreclosure listing service.
That's up from nearly 270,000 in the second quarter, the previous high
point in the firm's records dating back to 2005. Banks have seized more than 816,000 homes
through the first nine months of the year and had been on pace to seize
1.2 million by the end of 2010. But fewer are expected now that several
major lenders have suspended foreclosures and sales of repossessed
homes until they can sort out the foreclosure-documents mess.
On Wednesday, officials in 50 states
and the District of Columbia launched a joint investigation into the
matter. Rick Sharga, a
senior vice president at RealtyTrac, noted that legal challenges are
likely. But he doubts many will be successful in overturning
foreclosures. He said he expects foreclosures to resume and predicts
about 1 million homes will be taken back this year.
"The bottom line is not that those
properties won't be repossessed," Sharga said. "They simply won't be
repossessed as quickly. We're simply delaying the inevitable."
Experts say if lenders resume
foreclosures in a couple of months or so, the delay will amount to a
temporary lull followed by a spike in home repossessions early next
year. But if the
crisis drags on for months and more lenders stop seizing homes, the
foreclosure delays could last well into next year. That could have a
severe effect on home sales and prices. A freeze in foreclosure sales between now
and December by a majority of lenders could amount to removing 30
percent of all home sales for that period, Sharga suggests.
"You would virtually guarantee that
tens of thousands of properties would miss going to market in time for
the spring, which is the peak buying season for real estate," Sharga
said.
Nearly 600,000 bank-owned homes are
not yet on the market, according to RealtyTrac. The states most affected by the
foreclosure freeze accounted for 40 percent of all foreclosure activity
in the third quarter and 36 percent of homes taken back by lenders, the
firm estimates. Sales of homes by lenders made up 18 percent of all
U.S. home sales in September, the firm said.
Other experts say delays from the
foreclosure documents problem won't end up having a huge impact on home
sales or housing values.
Foreclosed homes that would have
been sold by lenders now will be sold seven or eight months from now,
and prices will start going declining about 3 percent to 4 percent
nationally, on average, when those sales take place, said Andres
Carbacho-Burgos, an economist at Moody's Economy.com. That's good news if you're a homeowner
looking to sell in the near term, because there won't be as much
competition from deeply discounted foreclosed properties,
Carbacho-Burgos said.
"But if you were looking to sell
further down the line, that's not so good news," he said.
Economic woes, such as unemployment
or reduced income, continue to be the main catalysts for foreclosures
this year. While bank
repossessions rose in the third quarter, new defaults continued to
decline. Some 269,647
properties received default notices, the first step in the foreclosure
process, down 1 percent from the second quarter and down 21 percent
from the same period last year, according to RealtyTrac, which tracks
notices for defaults, scheduled home auctions and home repossessions.
In all, 930,437 homeowners received
a foreclosure-related warning between July and September, up nearly 4
percent from the second quarter but down 1 percent from the same period
last year, RealtyTrac said. The latest tally translates to one in 139
U.S. homes.
Blumenthal
To Co-Lead Nationwide Foreclosure Robo-Signing Inquiry
By KENNETH R. GOSSELIN, kgosselin@courant.com
12:38 PM EDT, October 13, 2010
Connecticut Attorney General Richard Blumenthal will help lead a
50-state investigation of foreclosure document signing practices in
which major banks and servicers allegedly approved affadivits without
reading them or verifying their accuracy.
Blumenthal is one of 12 state
attorneys general on the executive committee that will lead the
nationwide inquiry. The nationwide probe was announced today.
Mortgage servicers, including
GMAC/Ally, Bank of America and JPMorgan Chase, have acknowledged filing
possibly fraudulent paperwork in foreclosures across the country. The
affidavits — typically listing a borrower's total debt in the
foreclosure — were affirmed by "robo-signers," some of which spent less
than a minute on each document.
"Our powerful multi-state
investigation will hold big banks accountable, determining how and why
they broke the law," Blumenthal said today. "At best, banks engage in
careless negligence, at worst, outright fraud. We will fight to find
out what happened, when and why, seeking fair and appropriate remedies
for consumers."
Blumenthal is running for U.S.
Senate, but will be attorney general until early January regardless of
the outcome of that election.
Blumenthal also is seeking a 60-day
freeze on all home foreclosures in Connecticut in the wake of the
widening scandal. The courts could decide later this week if they have
the power to do that.
The nationwide probe, includes
attorneys general in 49 of the states and bank regulators, will focus
on whether mortgage company employees made false statements or
preparted documents improperly.
Although there have been no firm
estimates on how many foreclosures may have been affected by the
practice, it could have impacted, by some estimates, hundreds of
thousands of homeowners. In Connecticut, thousands of foreclosures
could have been affected, some local foreclosure attorneys have
estimated.
Not all the documents affirmed by
robo-signers are necessarily inaccurate. But the affidavits typically
also contain the phrase "I am personally familiar with the books and
records" of the borrower. The affidavit is then signed and notarized as
an official court document.
The speed at which the documents
were signed could not have allowed the robo-signer to become familiar
with the case, some have argued.
"This group has the backing of
nearly every state in the nation to get to the bottom of this
foreclosure mess," Iowa Attorney General Tom Miller, who is leading the
probe.
Four large lenders already have
halted questionable foreclosures after evidence emerged that bank
employees processed thousands of foreclosure documents without reading
them. Other banks have not done so, saying they did nothing wrong.
Officials
in 50 states launch foreclosure probe YAHOO
By ALAN ZIBEL, AP Real Estate Writer
13 October 2010
WASHINGTON – Officials in 50 states
and the District of Columbia have launched a joint investigation into
allegations that mortgage companies mishandled documents and broke laws
in foreclosing on hundreds of thousands of homeowners.
The states' attorneys general and
bank regulators will examine whether mortgage company employees made
false statements or prepared documents improperly.
Alabama initially did not sign on to
the investigation. It reversed course after the joint statement was
released.
Attorneys general have taken the
lead in responding to a nationwide scandal that's called into question
the accuracy and legitimacy of documents that lenders relied on to
evict people from the homes. Employees of four large lenders have
acknowledged in depositions that they signed off on foreclosure
documents without reading them.
The allegations raise the
possibility that foreclosure proceedings nationwide could be subject to
legal challenge. Some foreclosures could be overturned. More than 2.5
million homes have been lost to foreclosure since the recession started
in December 2007, according to RealtyTrac Inc.
The state officials said they intend
to use their investigation to fix the problems that surfaced in the
mortgage industry.
"This is not simply about a glitch
in paperwork," said Iowa Attorney General Tom Miller, who is leading
the probe. "It's also about some companies violating the law and many
people losing their homes."
Ally Financial Inc.'s GMAC Mortgage
Unit, Bank of America and JPMorgan Chase & Co. already have halted
some questionable foreclosures. Other banks, including Citigroup Inc.
and Wells Fargo & Co. have not stopped processing foreclosures,
saying they did nothing wrong.
In a joint statement, the officials
said they would review evidence that legal documents were signed by
mortgage company employees who "did not have personal knowledge of the
facts asserted in the documents. They also said that many of those
documents appear to have been signed without a notary public witnessing
that signature — a violation of most state laws.
"What we have seen are not mere
technicalities," said Ohio Attorney General Richard Cordray. "This is
about the private property rights of homeowners facing foreclosure and
the integrity of our court system, which cannot enter judgments based
on fraudulent evidence."
Mortgage giant halts foreclosures in 23 states. Ally’s mortgage
business says ‘corrective action’ may be needed By Alistair Barr, MarketWatch
Sept. 20, 2010, 11:25 a.m. EDT
SAN FRANCISCO (MarketWatch) -- Ally Financial’s mortgage business is
halting foreclosures in 23 states because the company may need to take
“corrective action” on some of the transactions.
GMAC Mortgage, part of Ally, told brokers and agents to stop
foreclosures in Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico,
New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania,
South Carolina, South Dakota, Vermont and Wisconsin.
GMAC Mortgage will also suspend sales of homes that it’s already
foreclosed on. The company will extend the closing date on these sales
by 30 days. Buyers can cancel purchases and get their deposit back.
GMAC Mortgage said it may need to take “corrective action” on some
foreclosures in the 23 states, according to a memo it sent to brokers
and agents.
Bloomberg News reported the memo earlier on Monday. Jim Olecki, a
spokesman at Ally, said the memo was accurate. State
foreclosures down 22 percent in August DAY
Associated Press Article published Sep 16,
2010
Hartford (AP) — A new report says foreclosure filings in Connecticut
plummeted 22 percent from July to August, while the state's ranking on
the national list dropped nine spots to No. 32.
The report released Wednesday by the foreclosure tracking firm
RealtyTrac says foreclosure filings in Connecticut fell from 2,319 in
July to 1,796 in August, but whether the state numbers have peaked
isn't clear.
Foreclosure filing increases in the state slowed in April. The numbers
dropped in May and June, but increased substantially in July.
The August numbers translated to a foreclosure filings rate of one in
every 804 households in Connecticut, much better than the national
average of one in every 381 households.
Nevada has the worst rate, with one in 84 households having a filing. Homes
lost to
foreclosure on track for 1M in 2010
New London DAY
Associated Press
Article published Jul 15, 2010
LOS ANGELES (AP) — More than 1 million American households are likely
to lose their homes to foreclosure this year, as lenders work their way
through a huge backlog of borrowers who have fallen behind on their
loans.
Nearly 528,000 homes were taken over by lenders in the first six months
of the year, a rate that is on track to eclipse the more than 900,000
homes repossessed in 2009, according to data released Thursday by
RealtyTrac Inc., a foreclosure listing service.
"That would be unprecedented," said Rick Sharga, a senior vice
president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes
a year, Sharga said.
The surge in home repossessions reflects the dynamic of a foreclosure
crisis that has shown signs of leveling off in recent months, but
remains a crippling drag on the housing market.
The pace at which new homes falling behind in payments and entering the
foreclosure process has slowed as banks continue to let delinquent
borrowers stay longer in their homes rather than adding to the glut of
foreclosed properties on the market. At the same time, lenders have
stepped up repossessions in an effort to clear out the backlog of
distressed inventory on their books.
The number of households facing foreclosure in the first half of the
year climbed 8 percent versus the same period last year, but dropped 5
percent from the last six months of 2009, according to RealtyTrac,
which tracks notices for defaults, scheduled home auctions and home
repossessions.
In all, about 1.7 million homeowners received a foreclosure-related
warning between January and June. That translates to one in 78 U.S.
homes.
Foreclosure notices posted monthly declines in April, May and June, but
Sharga said one shouldn't read too much into that.
"The banks are really sort of controlling or managing the dial on how
fast these things get processed so they can ultimately manage the
inventory of distressed assets on the market," he said.
On average, it takes about 15 months for a home loan to go from being
30 days late to the property being foreclosed and sold, according to
Lender Processing Services Inc., which tracks mortgages.
Assuming the U.S. economy doesn't worsen, aggravating the foreclosure
crisis, Sharga projects it will take lenders through 2013 to resolve
the backlog of distressed properties that have on their books right now.
And a new wave of foreclosures could be coming in the second half of
the year, especially if the unemployment rate remains high,
mortgage-assistance programs fail, and the economy doesn't improve fast
enough to lift home sales.
The prospect of lenders taking over more than a million homes this year
is likely to push housing values down, experts say.
Foreclosed homes are typically sold at steep discounts, lowering the
value of surrounding properties.
"The downward pressure from foreclosures will persist and prices will
be very weak well into 2012," said Celia Chen, senior director of
Moody's Economy.com.
She projects home prices will fall as much as 6 percent over the next
12 months from where they were in the first-quarter.
Economic woes, such as unemployment or reduced income, continue to be
the main catalysts for foreclosures this year. Initially, lax lending
standards were the culprit. Now, homeowners with good credit who took
out conventional, fixed-rate loans are the fastest growing group of
foreclosures.
There are more than 7.3 million home loans in some stage of
delinquency, according to Lender Processing Services. Lenders are
offering to help some homeowners modify their loans. But many borrowers
can't qualify or they are falling back into default. The Obama
administration's $75 billion foreclosure prevention effort has made
only a small dent in the problem.
More than a third of the 1.2 million borrowers who have enrolled in the
mortgage modification program have dropped out. That compares with
about 27 percent who have received permanent loan modifications and are
making payments on time.
Among states, Nevada posted the highest foreclosure rate in the first
half of the year. One in every 17 households there received a
foreclosure notice. However, foreclosures there are down 6 percent from
a year earlier.
Arizona, Florida, California and Utah were next among states with the
highest foreclosure rates. Rounding out the top 10 were Georgia,
Michigan, Idaho, Illinois and Colorado. More borrowers
exit Obama mortgage help plan
YAHOO
By ALAN ZIBEL, AP Real Estate Writer
21 June 2010
WASHINGTON – A growing number of homeowners who sought help from the
Obama administration's main mortgage aid program are in danger of
losing their homes.
About 436,000 borrowers have dropped out of the $75 billion plan as of
last month, the Treasury Department said Monday.
That's about 35 percent of the 1.24 million who enrolled since March
2009 and exceeds the number of homeowners who are getting help through
the program. And nearly 155,000 of those who fell out of the program
did so in the past month.
The result could be a new wave of foreclosures that could weaken the
housing market and hold back the broader economic recovery.
Most of those homeowners were rejected during a trial period lasting at
least three months. More than 6,300 dropped out after having their
loans modified.
Another 340,000 homeowners, or 27 percent of those who started the
program, have received permanent loan modifications and are making
payments on time.
Experts say more borrowers are likely to drop out in the coming months.
Some homeowners who owe more on their loans than their properties are
worth are likely to conclude that paying an oversized mortgage simply
isn't worth the cost.
Even after their loans are modified, many borrowers are simply stuck
with too much debt — from car loans to home equity loans to credit
cards.
"The majority of these modifications aren't going to be successful,"
said Wayne Yamano, vice president of John Burns Real Estate Consulting,
a research firm in Irvine, Calif. "Even after the permanent
modification, you're still looking at a very high debt burden."
Obama administration officials contend that borrowers are still getting
help — even if they fail to qualify for the program. The administration
published statistics showing that nearly half of borrowers who fell out
of the program received an alternative loan modification from their
lender. About 7 percent fell into foreclosure.
Another option is a short sale — one in which banks agree to let
borrowers sell their homes for less than they owe on their mortgage.
A short sale results in a less severe hit to a borrower's credit score,
and is better for communities because homes are less likely to be
vandalized or fall into disrepair. To encourage more of those sales,
the Obama administration is giving $3,000 for moving expenses to
homeowners who complete such a sale or agree to turn over the deed of
the property to the lender.
The program is designed to lower borrowers' monthly payments by
reducing their mortgage rates to as low as 2 percent for five years and
extending loan terms to as long as 40 years. Mortgage companies get up
to $75 billion in taxpayer incentives to reduce borrowers' monthly
payments. Mortgage
delinquencies rise in 4th quarter
DAY
By EILEEN AJ CONNELLY AP Personal Finance Writer
Article published Feb 17, 2010
The percentage of homeowners late with mortgage payments hit another
record during the last three months of 2009, and the pace at which they
fell behind took a turn for the worse, a new report says.
For the fourth quarter, 6.89 percent of mortgage payments were 60 or
more days past due, according to credit reporting agency TransUnion.
That's up from 4.58 percent in the final three months of 2008. The
previous record delinquency rate was 6.25 percent in the third quarter
of 2009.
The latest report marked the 12th consecutive quarter, equal to three
full years, that delinquency rates have risen from the previous
year.
More worrisome was that the quarter-to-quarter trend swung higher after
declining in each of the previous three quarters. The
fourth-quarter
uptick was in part due normal seasonal spending shifts, said FJ
Guarrera, vice president of TransUnion's financial services business
unit. Consumers are more likely to have trouble paying bills during the
last few months of the year, as they run low on cash because of holiday
spending.
But even accounting for normal season patterns, there is some reason to
be concerned about the pace of increase moving higher, Guarrera said.
"To see continuing growth in the first quarter would certainly raise an
eyebrow," he said.
He noted that many homeowners still have adjustable rate mortgages
written in late 2006 or early 2007 due to reset to higher rates in
coming months. That could drive foreclosures even higher, especially in
areas where home prices have fallen to the point where values are lower
than mortgages. "We're not out of the woods yet," Guarrera said.
The delinquency rate stayed highest in Nevada, at 16.2 percent, and
Florida, at 14.9 percent. Arizona and California, states hit by the
housing crisis, were third and fourth, at 11.3 percent and 11 percent,
respectively. The highest growth rates compared with the third
quarter
were in the District of Columbia, Louisiana and Delaware. The
lowest
delinquencies remain in North Dakota, at 1.8 percent, and South Dakota,
at 2.5 percent.
There were some bright spots in the report. While no states that showed
delinquency rate improvement in the fourth quarter, TransUnion said
there were improvements in the areas around 38 cities. That reflects
other signs that the economic recovery will be tied to local housing
prices and unemployment rates, TransUnion said.
The average national mortgage debt per borrower also increased to
$193,690 in the latest quarter from $192,789 in the fourth quarter of
2008. "We've said all along that home values have got to improve in
order to see some stabilization in terms of mortgage delinquencies,"
Guarrera said. An increase in the amount of the average mortgage debt
indicates rising home prices.
TransUnion expects foreclosures to continue rising throughout this
year, peaking between 7.5 percent and 8 percent. The situation will be
worst in Nevada, where as many as one in five mortgage borrowers may be
delinquent by the middle of the year.
Slumburbia NYTIMES By TIMOTHY EGAN February 10, 2010, 9:30 pm LATHROP, Calif. — Drive along foreclosure
alley, through new planned communities that look like tile-roofed
versions of a 21st century ghost town, and you see what happens when
people gamble with houses instead of casino chips.
Dirty flags advertise rock-bottom
discounts on empty starter mansions. On the ground, foreclosure signs
are tagged with gang graffiti. Empty lots are untended, cratered with
mud puddles from the winter storms that have hammered California’s San
Joaquin Valley.
Nobody is home in the cities of the
future.
In a decade, they saw real property
defy reality in real time in these insta-neighborhoods that sprouted in
what had been some of the world’s most productive farmland.
In places like Lathrop, Manteca and
Tracy, population nearly doubled in 10 years, and home prices tripled.
After inhaling all this real estate helium, some developers and their
apologists in urban planning circles hailed the boom as the new America
at the far exurban fringe. Every citizen a homeowner! Half-acre lots
for all! No credit, no problem!
Others saw it as the residential
embodiment of the Edward Abbey line that “growth for the sake of growth
is the ideology of the cancer cell.”
Now median home prices have fallen
from $500,000 to $150,000 — among the most precipitous drops in the
nation — and still the houses sit empty, spooky and see-through,
waiting on demography and psychology to catch up.
In strip malls where tenants seem to
last no longer than the life cycle of a gold fish, the bottom-feeders
have moved in. “Coming soon: Cigarette City,” reads one sign here in
Lathrop, near a “Cash Advance” outlet.
Take a pulse: How can a community
possibly be healthy when one in eight houses are in some stage of
foreclosure? How can a town attract new people when the crime rate has
spiked well above the national average? How can a family dream, or even
save, when unemployment hovers around 16 percent?
Yet if these staggered exurbs, about
two hours inland from San Francisco, were an illness, they would not
quite be Abbey’s cancer. Though sick, foreclosure alley is not
terminal. This is not Detroit with sunshine. It will be reborn, remade,
inhabited. The question is: as what?
Nationwide, a record 2.8 million
homes received foreclosure notices last year — up 119 percent from two
years ago. Just under 5 million homeowners — 1 in 10 mortgages — owe
more than their houses are worth. The impulse is to walk away.
Surrender. And many have.
What they leave behind, along with
the gang presence, the vandalism and the absence of vested owners, is a
slum. A new slum. In an influential article in the Atlantic in 2008,
the writer Christopher B. Leinberger predicted that the catastrophic
collapse of the new home market could turn many of today’s McMansions
into tenements.
I’m not sure of that. After several
days in foreclosure alley, this broad swath of the Central Valley that
has been rated by some economists as the most stressed region during
the Great Recession, I can’t see such apocalyptic forecasts coming true.
Yes, huge developments are empty,
with rising crime at the edges, and thousands of homes owned by banks
that can’t unload them even at fire-sale prices.
But through it all, the country
churns and expands, unlike most other Western democracies. That great
American natural resource — tomorrow — will have to save the suburban
slums.
Through immigration and high birth
rates, the United States is expected to add another 100 million people
by 2050. If you don’t believe me, consider that we’ve added 105 million
people since 1970. This is more than the population of France. More
than Italy. More than Germany. Currently, we have a net gain of one
person every 13 seconds.
At some point, the market will
settle on proper pricing levels. At its peak, only 11 percent of the
people in this valley could afford the median home price.
In the meantime, during these low,
ragged years, a few lessons about urban planning can be picked from the
stucco pile.
One is that, at least here in
California, the outlying cities themselves encouraged the boom, spurred
by the state’s broken tax system. Hemmed in by property tax
limitations, cities were compelled to increase revenue by the easiest
route: expanding urban boundaries. They let developers plow up walnut
groves and vineyards and places that were supposed to be strawberry
fields forever to pay for services demanded by new school parents and
park users.
Second, look at the cities with
stable and recovering home markets. On this coast, San Francisco,
Portland, Seattle and San Diego come to mind. All of these cities have
fairly strict development codes, trying to hem in their excess sprawl.
Developers, many of them, hate these restrictions. They said the
coastal cities would eventually price the middle class out, and start
to empty.
It hasn’t happened. Just the
opposite. The developers’ favorite role models, the laissez faire
free-for-alls — Las Vegas, the Phoenix metro area, South Florida, this
valley — are the most troubled, the suburban slums.
Come see: this is what happens when
money and market, alone, guide the way we live.
BUT FORECLOSURES RISING...
Home sales rose in '09 as prices plunged 12 pct. YAHOO
By ALAN ZIBEL, AP Real Estate Writer
January 25, 2010
WASHINGTON – Sales of previously
occupied homes rose in 2009 for the first time in four years, despite a
December slump that was due to a tax credit that led many buyers to
complete sales earlier.
Still, prices plunged more than 12
percent last year — the sharpest fall since the Great Depression. The
price drop for 2009 — to a median of $173,500 — showed the housing
market remains too weak to help fuel a sustained economic recovery.
Concerns remain that home sales will
weaken after March 31, when the Federal Reserve is set to end its
program to buy mortgage securities to keep home loan rates low. Once
that program ends, mortgage rates could rise. Adding to the worries, a
newly extended homebuyer tax credit is set to run out at the end of
April.
Some analysts question whether the
housing market can remain stable without the hundreds of billions in
government spending now propping it up.
Once the Fed's mortgage-buying
program ends, analysts say rates could rise as high as 6 percent from
the current level of around 5 percent for 30-year loans. That's why
some expect the Fed to either extend or expand the program after March,
concluding that the housing market remains too fragile.
"You just can't go from 100 miles an
hour to a dead stop and expect it to happen without a big jump in
mortgage rates," said Greg McBride, senior financial analyst at
Bankrate.com.
Still, some real estate agents say
they feel encouraged. More buyers are shopping around this month than
in a typical January, said Kevin O'Shea, an agent with Homes of
Westchester Inc. in White Plains, N.Y.
"There are indications that the
economy is coming back," he said. "And that makes buyers feel more
secure."
With median sale prices down 23
percent from their peak in summer 2006, homes have become more
affordable in many markets. The tax credit has helped. Many of those
active in the housing market these days are first-time buyers or
investors looking to gain from the lower prices.
Connie McInturff, 58, and her
husband, for example, looked at about 50 properties over 10 months
before deciding on a four bedroom foreclosed home in a suburb of
Orlando, Fla.
They're paying $135,000 for a house
that's been vacant for two years, and they plan to spend up to $10,000
to replace missing appliances and install carpeting. They plan to rent
it out, with the goal of eventually turning a profit.
The poor December results reported
Monday by the National Association of Realtors occurred after Congress
extended the tax credit, easing pressure on buyers to act quickly. The
credit of up to $8,000 for first-time homeowners had been due to expire
Nov. 30. But Congress extended the deadline and expanded it with a new
$6,500 credit for existing homeowners who move.
December's sales fell 16.7 percent
to a seasonally adjusted annual rate of 5.45 million, from an unchanged
pace of 6.54 million in November, the Realtors report said. It was the
largest monthly drop in 40-years of record-keeping. Sales had been
expected to fall by about 10 percent, according to economists surveyed
by Thomson Reuters.
For all of 2009, sales totaled
nearly 5.2 million, up about 5 percent from 2008.
The median sales price for December
was $178,300, up 1.5 percent from a year earlier and the first yearly
gain since August 2007. But some of that increase might be due to a
drop-off in purchases from first-time buyers who tend to buy less
expensive homes.
Sales are now up 21 percent from the
bottom a year ago. But they're down 25 percent from the peak more than
four years ago. Last
year, first-time buyers were the main driver of the housing market. But
their role is shrinking. They accounted for 43 percent of purchases in
December, down from about half in November, the Realtors group said.
The
inventory of unsold homes on the market fell about 7 percent to 3.3
million. That's a 7.2 month supply at the current sales pace, close to
a healthy level of about six months.
Many
analysts project that home prices, which had begun to rise last summer,
will fall again as spring approaches. That's because foreclosures make
up a larger proportion of sales during winter, when fewer sellers
choose to put their homes on the market.
And
foreclosures are still rising. The Obama administration's program to
aid homeowners has been a disappointment, with only 66,500 borrowers,
or 7 percent of those who signed up, completing the program as of
December.
The
Treasury Department plans later this week to announce a streamlined
process designed to get more borrowers to complete the loan
modification program, a spokeswoman said. The program reduces mortgage
rates to as low as 2 percent for five years.
Last
week, Richard Neiman, New York's top banking regulator, warned that
450,000 homeowners risk falling out of the program by the end of the
month because they haven't returned the necessary paperwork. The
program, he said, is "simply being drowned by a fierce flood of
foreclosures."
___
AP Real Estate Writers J.W.
Elphinstone in New York and Adrian Sainz in Miami contributed to this
report. Geithner:
bailout program extended to October YAHOO
By JEANNINE AVERSA, AP Economics Writer
December 9, 2009
WASHINGTON – Treasury Secretary
Timothy Geithner announced Wednesday that the administration will
extend the government's financial bailout program until next fall.
In a letter to House and Senate
leaders, Geithner said the extension is "necessary to assist American
families and stabilize financial markets."
Money from the $700 billion
taxpayer-funded bailout program has helped rescue big Wall Street
firms, auto companies and others. That's angered many Americans, who
feel the government hasn't provided them with relief from high
unemployment and rising home foreclosures.
Geithner said the Troubled Asset
Relief Program that Congress passed in October 2008, will be extended
until Oct. 3, 2010. He has the authority to extend the TARP simply by
notifying lawmakers.
"The recovery of our financial
system remains incomplete," Geithner told lawmakers. "And, near-term
shocks to that system could undermine the economic recovery we have
seen to do."
The Treasury secretary said new
commitments bankrolled by the bailout fund will be limited to three
areas next year.
One focus is stepping up efforts to
curb record-high home foreclosures, a move necessary to stabilize the
housing market and support a lasting economic recovery.
Another will be providing capital to
small banks, which play a crucial role in providing credit to small
businesses — normally a leading engine of job creation. But small banks
have been weighed down by problem commercial real estate loans, which
has made them reluctant to lend and hurt the ability of small
businesses to expand and hire.
In a third area, Geithner said the
government may boost its commitment to a program aimed at sparking
lending to consumers and small businesses. Run by Treasury and the
Federal Reserve, the Term Asset-Backed Securities Loan Facility, or
TALF, started in March.
Geithner said he didn't expect any
new commitments to the TALF would result in additional costs to
taxpayers. Gov't unveils plan to shrink some home
loans
YAHOO
By ALAN ZIBEL, AP Real Estate
26 March 2010
WASHINGTON – After months of criticism that it hasn't done enough to
prevent foreclosures, the Obama administration is announcing a plan to
reduce the amount some troubled borrowers owe on their home loans.
The multifaceted effort will let people who owe more on their mortgages
than their properties are worth get new loans backed by the Federal
Housing Administration, a government agency that insures home loans
against default.
That would be funded by $14 billion from the administration's existing
$75 billion foreclosure-prevention program. But it could spark
criticism that the government is shouldering too much risk by taking on
bad loans made during the housing boom. In addition, their existing
mortgage companies will be able to receive incentives to lower their
principal balances.
The program also includes assistance to help unemployed homeowners keep
paying their mortgages.
The plan is the latest effort by the Obama administration to tackle the
foreclosure crisis which has continued to grow under its watch. Home
foreclosures have soared despite the administration's effort to prevent
foreclosures, a complex and problem-plagued endeavor involving more
than 100 mortgage companies. Only 170,000 homeowners have completed
that process out of 1.1 million who began it over the past year.
"We remain dubious about government mortgage modification efforts,"
wrote Jaret Seiberg, an analyst with Concept Capital's Washington
Research Group. "So far none have lived up to expectations and we see
little reason to believe the latest effort will turn out any different."
The plan announced Friday will also require the mortgage companies
participating in the administration's existing foreclosure prevention
program to consider slashing the amount borrowers owe. They will get
incentive payments if they do so.
It also includes three to six months of temporary aid for borrowers who
have lost their jobs. And there will be additional payments designed to
give banks an incentive to reduce payments or eliminate second
mortgages such as home equity loans — a problem that has blocked many
loan modifications.
The four big holders of second mortgages — Citigroup Inc., Bank of
America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. —
have now joined the government's program to modify second mortgages.
That program was delayed for months but with Citi on board, the major
players in the industry are now on board.
Critics have complained that the Obama administration has done little
until now to encourage banks to cut borrowers' principal balances on
their primary loans. Nearly one in every three homeowners with a
mortgage are "under water" — they owe more than their property is worth
— according to Moody's Economy.com.
U.S. to Pressure
Mortgage Firms for Loan Relief NYTIMES
By PETER S. GOODMAN November 29, 2009 The Obama administration on Monday
plans to announce a campaign to pressure mortgage companies to reduce
payments for many more troubled homeowners, as evidence mounts that a
$75 billion taxpayer-financed effort aimed at stemming foreclosures is
foundering.
“The banks are not doing a good
enough job,” Michael S. Barr, Treasury’s assistant secretary for
financial institutions, said in an interview Friday. “Some of the firms
ought to be embarrassed, and they will be.”
Even as lenders have in recent
months accelerated the pace at which they are reducing mortgage
payments for borrowers, a vast majority of loans modified through the
program remain in a trial stage lasting up to five months, and only a
tiny fraction have been made permanent.
Mr. Barr said the government would
try to use shame as a corrective, publicly naming those institutions
that move too slowly to permanently lower mortgage payments. The
Treasury Department also will wait until reductions are permanent
before paying cash incentives that it promised to mortgage companies
that lower loan payments.
“They’re not getting a penny from
the federal government until they move forward,” Mr. Barr said.
From its inception early this year,
the Obama administration’s program, called Making Home Affordable, has
been dogged by persistent questions about whether it could diminish a
swelling wave of foreclosures. Some economists argued that the plan was
built for last year’s problem — exotic mortgages whose payments
increased — and not for the current menace of soaring joblessness.
Lawyers who defend homeowners against foreclosure maintained that
mortgage companies collect lucrative fees from long-term delinquency,
undercutting their incentive to lower payments to affordable levels.
Last month, an oversight panel
created by Congress reported that fewer than 2,000 of the 500,000 loan
modifications then in progress had become permanent under Making Home
Affordable. When the Treasury releases new numbers next month, it is
expected to report a disappointingly small number of permanent loan
modifications, with estimates in the tens of thousands out of the more
than 650,000 borrowers now in the program.
More unsatisfactory data is likely
to intensify pressures on the Obama administration to mount a more
muscular effort to stem foreclosures beyond the Treasury’s campaign
this week. Populist anger has been fanned by a growing perception that
the Treasury has lavished generous bailouts on Wall Street institutions
while neglecting ordinary homeowners — this, in the midst of
double-digit unemployment, which is daily sending more households into
delinquency.
“I’ve been very frustrated by the
pace of the program,” said Senator Jeff Merkley, an Oregon Democrat who
sits on the Senate Banking Committee. “Very few people have emerged
from the trial period.”
Though the administration’s program
was initially proclaimed as a means of sparing three to four million
households from foreclosure, “they’re going to be lucky if they save
one or one-and-a-half million,” said Edward Pinto, a consultant to the
real estate finance industry who served as chief credit officer to the
government-backed mortgage company Fannie Mae in the late 1980s.
A White House spokeswoman, Jennifer
R. Psaki, said the administration would continue to refine the program
as needed. “We will not be satisfied until more program participants
are transitioning from trial to permanent modifications,” she said.
Capitol Hill aides in regular
contact with senior Treasury officials say a consensus has emerged
inside the department that the program has proved inadequate,
necessitating a new approach. But discussions have yet to reach the
point of mapping out new options, the aides say.
“People who work on this on a
day-to-day basis are vested enough in it that they think there’s a need
to do a course correction rather than a wholesale rethink,” said a
Senate Democratic aide, who spoke on the condition he not be named for
fear of angering the administration. “But at senior levels, where
people are looking at this and thinking ‘Good God,’ there’s a sense
that we need to think about doing something more.”
Mr. Barr, who supervises the
program, portrayed such deliberations as part of a constant process of
assessment within the Treasury. He expressed confidence that the
mortgage program had sufficient tools to deliver relief, characterizing
the slow pace as reflecting a lack of follow-through, and not
structural defects requiring a revamping.
“We’re seeing a failure by some of
the bigger banks on execution,” Mr. Barr said. “We’re going to be quite
focused and direct on particular institutions that are not doing a good
job.”
The banks say they are making
good-faith efforts to comply with the program and provide relief.
“We’ve poured resources into this,”
said a spokesman for JPMorgan Chase, Tom Kelly. “We’ve made dramatic
improvements, and we continue to try to get better.”
Some senators contend that the
Treasury program, addressing mortgages whose low promotional interest
rates had soared, is outmoded. At this point, foreclosures are being
propelled by joblessness, which is sending millions of previously
credit-worthy people with ordinary mortgages into delinquency.
Within the Senate, some discussion
now focuses on pursuing legislation that would create a national
foreclosure prevention program modeled on one started last year in
Philadelphia. That program forces mortgage companies to submit to
court-supervised mediation with delinquent borrowers aimed at striking
an equitable resolution before they are allowed to proceed with the
sale of foreclosed homes.
Some Democrats say the time has come
to reconsider a measure opposed by the Obama administration: giving
bankruptcy judges the right to amend mortgages as a means of pressuring
lenders to extend reductions.
Lawyers who defend homeowners
against foreclosure increasingly say they doubt the Treasury program
can be made effective. Under the plan, companies that agree to lower
payments for troubled borrowers collect $1,000 from the government,
followed by another $1,000 a year for up to three years. The program is
premised on the idea that a small cash incentive will induce the banks
to cut their losses and accept smaller payments.
But the mortgage companies that
collect payments from homeowners — servicers, as they are known —
generally do not own the loans. Rather, they collect fees from
investors that actually own mortgages, and their fees often increase
the longer a borrower remains in delinquency.
Under the Treasury program,
borrowers who receive loan modifications must make their new payments
on a trial basis and then submit new paperwork validating their income
to make their modifications permanent.
But borrowers and their lawyers
report that much of the required paperwork is being lost in a haze of
bureaucratic disorganization. Servicers are abruptly changing fax
numbers and mislaying files — the same issues that have plagued the
program from its inception.
“People continue to get lost in the
phone tree hell,” said Diane E. Thompson, a lawyer with the National
Consumer Law Center.
Some lawyers who defend homeowners
against foreclosure assert that mortgage companies are merely stalling,
using trial loan modifications as an opportunity to extract a few more
dollars from borrowers who would otherwise make no payments.
“I don’t think they ever intended to
do permanent loan modifications,” said Margery Golant, a Florida lawyer
who previously worked for a major mortgage company, Ocwen Financial.
“It’s a shell game that they’re playing.” U.S.
Mortgage Delinquencies Reach a Record High NYTIMES
By DAVID STREITFELD November 20, 2009
The number of people at least one
month behind on their house payments rose to a record in the third
quarter, the Mortgage Bankers Association said Thursday.
Nearly 10 in 100 homeowners are
delinquent, according to the association’s data, up from about seven
out of 100 in the third quarter of 2008.
These
numbers do not include those
who are actually in foreclosure, a figure that also rose sharply. The
combined percentage of those in foreclosure as well as delinquent is
14.41 percent, or about one in seven of mortgage holders...full story here.
U.S. "option" mortgages to
explode, officials warn
YAHOO
By Lisa Lambert
Thu Sep 17, 3:15 pm ET
WASHINGTON (Reuters) – The federal government and states are girding
themselves for the next foreclosure crisis in the country's housing
downturn: payment option adjustable rate mortgages that are beginning
to reset.
"Payment option ARMs are about to explode," Iowa Attorney General Tom
Miller said after a Thursday meeting with members of President Barack
Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he
said.
Option-ARMs are now considered among the riskiest offered during the
recent housing boom and have left many borrowers owing more than their
homes are worth. These "underwater" mortgages have been a driving force
behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next
year and many have started to adjust this month, the state's attorney
general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's
dropping now."
The mortgages differ from other ARMs by offering an option to pay only
the interest each month or a low minimum payment that leads to a rising
balance in the loan's principal. When the balance of the loan
reaches a certain level or the mortgage
hits a specific date, the borrower must begin making full payments to
cover the new amount. The loan's interest rate also may have been fixed
at a low level for the first few years with a so-called teaser rate,
but then reset to a higher level.
Because the new monthly payments can be five or 10 times what borrowers
are accustomed to paying, they "threaten a much greater hit to the
consumer than the subprimes," Goddard said, referring to the mortgages
often extended to less credit-worthy borrowers that fed the first wave
of the financial crisis.
Miller said option-ARMs were discussed at Tuesday's meeting on mortgage
scams, which brought state attorneys general from across the country
together with U.S. Treasury Secretary Timothy Geithner, Attorney
General Eric Holder, Housing and Urban Development Secretary Shaun
Donovan, and Federal Trade Commission Chairman Jon Leibowitz.
The mortgages tend to be "jumbo," or for significantly large amounts,
Goddard said, making it even harder for borrowers to sidestep
foreclosure. He said he expected to see an increase in scams as
distressed homeowners become more desperate to refinance big
debts. Goddard said his office is investigating hundreds of cases
where
companies have made fraudulent promises, and charged large fees, to
mortgage defaulters.
The U.S. housing market has suffered the worst downturn since the Great
Depression, and its impact has rippled through the recession-hit
economy. Some signs of stabilization emerged recently, with sales
rising and
home price declines moderating in many regions of the country. Home
prices in some regions have risen. However, many economists say
there is still a huge supply of unsold
homes lingering on the market and that, coupled with a frenzy of more
foreclosures ahead, should depress home prices for the rest of 2009.
Real estate data firm RealtyTrac, in its August 2009 U.S. Foreclosure
Market Report, said foreclosure filings -- default notices, scheduled
auctions and bank repossessions -- were reported on 358,471 U.S.
properties during the month, a decrease of less than 1 percent from the
previous month, but an increase of nearly 18 percent from the same
month a year ago.
The report said one in every 357 U.S. housing units received a
foreclosure filing last month. Treasury
Says Millions More
Foreclosures Coming
NYTIMES
By REUTERS
September 9, 2009
Filed at 11:02 a.m. ET
WASHINGTON (Reuters) - Only 12 percent of U.S. homeowners eligible for
loan modifications under the Obama administration's housing rescue plan
have had their mortgages reworked, and millions more foreclosures are
coming, the Treasury Department said on Wednesday.
A Treasury report showed 360,165 people had their monthly payments
reduced through August, up from 235,247 through July, but a senior
Treasury official conceded much more must be done to soften the impact
of a severe and prolonged housing crisis. Treasury has begun
releasing monthly reports on the loan modification
program, called the Home Affordable Modification Program or HAMP.
In July, it said that just 9 percent of the estimated number of
homeowners eligible had had their loans modified, so Treasury's
assistant secretary for financial institutions, Michael Barr, was able
to claim modest progress in August. He told a House Financial
Services subcommittee that the program
launched in February, which brings banks and loan servicers together
with at-risk homeowners, was on target to help a half million Americans
homeowners by November 1. But that is a small start on a huge
problem at the heart of U.S. economic woes...full story here. A ‘Little Judge’ Who Rejects Foreclosures,
Brooklyn Style
NYTIMES
By MICHAEL POWELL
August 31, 2009
The judge waves you into his chambers in the State Supreme Court
building in Brooklyn, past the caveat taped to his wall — “Be sure
brain in gear before engaging mouth” — and into his inner office, where
foreclosure motions are piled high enough to form a minor Alpine chain.
Every week, the nation’s mightiest banks come to his court seeking to
take the homes of New Yorkers who cannot pay their mortgages. And
nearly as often, the judge says, they file foreclosure papers speckled
with errors.
He plucks out one motion and leafs through: a Deutsche Bank
representative signed an affidavit claiming to be the vice president of
two different banks. His office was in Kansas City, Mo., but the
signature was notarized in Texas. And the bank did not even own the
mortgage when it began to foreclose on the homeowner.
The judge’s lips pucker as if he had inhaled a pickle; he rejected this
one.
“I’m a little guy in Brooklyn who doesn’t belong to their country
clubs, what can I tell you?” he says, adding a shrug for punctuation.
“I won’t accept their comedy of errors.”
The judge, Arthur M. Schack, 64, fashions himself a judicial Don
Quixote, tilting at the phalanxes of bankers, foreclosure facilitators
and lawyers who file motions by the bale. While national debate focuses
on bank bailouts and federal aid for homeowners that has been slow in
coming, the hard reckonings of the foreclosure crisis are being made in
courts like his, and Justice Schack’s sympathies are clear.
He has tossed out 46 of the 102 foreclosure motions that have come
before him in the last two years. And his often scathing decisions,
peppered with allusions to the Croesus-like wealth of bank presidents,
have attracted the respectful attention of judges and lawyers from
Florida to Ohio to California. At recent judicial conferences in
Chicago and Arizona, several panelists praised his rulings as a
possible national model.
His opinions, too, have been greeted by a cry of affront from a bank
official or two, who say this judge stands in the way of what is
rightfully theirs. HSBC bank appealed a recent ruling, saying he had
set a “dangerous precedent” by acting as “both judge and jury,”
throwing out cases even when homeowners had not responded to
foreclosure motions.
Justice Schack, like a handful of state and federal judges, has taken a
magnifying glass to the mortgage industry. In the gilded haste of the
past decade, bankers handed out millions of mortgages — with terms
good, bad and exotically ugly — then repackaged those loans for sale to
investors from Connecticut to Singapore. Sloppiness reigned. So many
papers have been lost, signatures misplaced and documents dated
inaccurately that it is often not clear which bank owns the mortgage.
Justice Schack’s take is straightforward, and sends a tremor through
some bank suites: If a bank cannot prove ownership, it cannot foreclose.
“If you are going to take away someone’s house, everything should be
legal and correct,” he said. “I’m a strange guy — I don’t want to put a
family on the street unless it’s legitimate.”
Justice Schack has small jowls and big black glasses, a thin mustache
and not so many hairs combed across his scalp. He has the impish eyes
of the high school social studies teacher he once was, aware that
something untoward is probably going on at the back of his classroom.
He is Brooklyn born and bred, with a master’s degree in history and an
office loaded with autographed baseballs and photographs of the
Brooklyn Dodgers. His written decisions are a free-associative trip
through popular, legal and literary culture, with a sideways glance at
the business pages.
Confronted with a case in which Deutsche Bank and Goldman Sachs passed
a defaulted mortgage back and forth and lost track of the documents,
the judge made reference to the film classic “It’s a Wonderful Life”
and the evil banker played by Lionel Barrymore.
“Lenders should not lose sight,” Justice Schack wrote in that 2007
case, “that they are dealing with humanity, not with Mr. Potter’s
‘rabble’ and ‘cattle.’ Multibillion-dollar corporations must follow the
same rules in the foreclosure actions as the local banks, savings and
loan associations or credit unions, or else they have become the Mr.
Potters of the 21st century.”
Last year, he chastised Wells Fargo for filing error-filled papers.
“The court,” the judge wrote, “reminds Wells Fargo of Cassius’s advice
to Brutus in Act 1, Scene 2 of William Shakespeare’s ‘Julius Caesar’:
‘The fault, dear Brutus, is not in our stars, but in ourselves.’ ”
Then there is a Deutsche Bank case from 2008, the juicy part of which
he reads aloud:
“The court wonders if the instant foreclosure action is a corporate
‘Kansas City Shuffle,’ a complex confidence game,” he reads. “In the
2006 film ‘Lucky Number Slevin,’ Mr. Goodkat, a hit man played by Bruce
Willis, explains: ‘A Kansas City Shuffle is when everybody looks right,
you go left.’ ”
The banks’ reaction? Justice Schack shrugs. “They probably curse at
me,” he says, “but no one is interested in some little judge.”
Little drama attends the release of his decisions. Beaten-down
homeowners rarely show up to contest foreclosure actions, and the judge
scrutinizes the banks’ papers in his chambers. But at legal
conferences, judges and lawyers have wondered aloud why more judges do
not hold banks to tougher standards.
“To the extent that judges examine these papers, they find exactly the
same errors that Judge Schack does,” said Katherine M. Porter, a
visiting professor at the School of Law at the University of
California, Berkeley, and a national expert in consumer credit law.
“His rulings are hardly revolutionary; it’s unusual only because we so
rarely hold large corporations to the rules.”
Banks and the cottage industry of mortgage service companies and
foreclosure lawyers also pay rather close attention.
A spokeswoman for OneWest Bank acknowledged that an official,
confronted with a ream of foreclosure papers, had mistakenly signed for
two different banks — just as the Deutsche Bank official did. Deutsche
Bank, which declined to let an attorney speak on the record about any
of its cases before Justice Schack, e-mailed a PDF of a three-page
pamphlet in which it claimed little responsibility for foreclosures,
even though the bank’s name is affixed to tens of thousands of such
motions. The bank described itself as simply a trustee for investors.
Justice Schack came to his recent prominence by a circuitous path,
having worked for 14 years as public school teacher in Brooklyn. He was
a union representative and once walked a picket line with his wife,
Dilia, who was a teacher, too. All was well until the fiscal crisis of
the 1970s.
“Why’d I go to law school?” he said. “Thank Mayor Abe Beame, who froze
teacher salaries.”
He was counsel for the Major League Baseball Players Association in the
1980s and ’90s, when it was on a long winning streak against team
owners. “It was the millionaires versus the billionaires,” he says.
“After a while, I’m sitting there thinking, ‘He’s making $4 million,
he’s making $5 million, and I’m worth about $1.98.’ ”
So he dived into a judicial race. He was elected to the Civil Court in
1998 and to the Supreme Court for Brooklyn and Staten Island in 2003.
His wife is a Democratic district leader; their daughter, Elaine, is a
lawyer and their son, Douglas, a police officer.
Justice Schack’s duels with the banks started in 2007 as foreclosures
spiked sharply. He saw a plague falling on Brooklyn, particularly its
working-class black precincts. “Banks had given out loans structured to
fail,” he said.
The judge burrowed into property record databases. He found banks
without clear title, and a giant foreclosure law firm, Steven J. Baum,
representing two sides in a dispute. He noted that Wells Fargo’s chief
executive, John G. Stumpf, made more than $11 million in 2007 while the
company’s total returns fell 12 percent.
“Maybe,” he advised the bank, “counsel should wonder, like the court,
if Mr. Stumpf was unjustly enriched at the expense of W.F.’s
stockholders.”
He was, how to say it, mildly appalled.
“I’m a guy from the streets of Brooklyn who happens to become a judge,”
he said. “I see a bank giving a $500,000 mortgage on a building worth
$300,000 and the interest rate is 20 percent and I ask questions, what
can I tell you?”
Mortgages: Beware of Neighbor’s Home Foreclosure
NYTIMES
By BOB TEDESCHI
June 14, 2009
WHEN it comes to selling your house or planning your next home equity
line of credit, being a nosey neighbor could very well pay off.
That’s one implication of a recent report from the Center for
Responsible Lending, a consumer advocacy group based in Durham, N.C.
The report, which was released in May, focuses on the ripple effects of
home foreclosures, and suggests that homeowners who are concerned about
their home’s value should watch for signs of trouble among their
closest neighbors.
This year alone, it says, foreclosures will cause an estimated 69.5
million nearby homes to suffer price declines averaging $7,200 per
home. The loss in property value could total $500 billion.
The resulting loss in financial flexibility is significant. “Homeowners
who had counted on using their home equity to finance their retirement,
cover tuition costs, start a small business, or pay medical bills in
many cases no longer have this option,” the report said.
Ellen Schloemer, the executive vice president of the Center for
Responsible Lending, said that over the next four years, foreclosures
would affect an estimated 91.5 million neighboring homes.
“As the foreclosure crisis continues to worsen, the contagion is
spreading,” Ms. Schloemer said. “You can’t just say those foreclosures
are hurting someone else.”
The rate of home foreclosures has rise sharply since 2007, when the
first subprime adjustable-rate mortgages began resetting to higher
rates. But even borrowers with good credit have defaulted on their
loans as the economy has faltered.
According to the Mortgage Bankers Association, an industry trade group,
about 1.4 percent of all first mortgages entered foreclosure in the
first quarter of this year, a 20 percent jump from the fourth quarter
of 2008, and a record high.
The center’s report relied on forecasts from Credit Suisse, which said
late last year that about nine million homes would probably go into
foreclosure in 2009 to 2012. The center also used late 2008 data from
the Mortgage Bankers Association to estimate this year’s foreclosure
figures (about 2.4 million homes).
Two earlier reports released by the Center for Responsible Lending
examined the spillover effects of the mortgage crisis. But this year it
relied on new research about how a foreclosure affects neighborhood
home values — specifically, a 2008 study that includes researchers at
Fannie Mae, the government-sponsored agency, and the University of
Connecticut.
This study found that homeowners who lived within 300 feet of a
foreclosed residential property experienced a drop of 1.3 percent in
home value; those living 300 to 500 feet of the foreclosed home
typically see a drop in value of 0.6 percent.
John P. Harding, a professor at the University of Connecticut’s Center
for Real Estate and Urban Economic Studies, and an author of the study,
said the properties that are most affected by a foreclosure are the
ones close enough to see the peeling paint, broken windows and
overgrown lawns that often accompany such situations.
The worst time for immediate neighbors to sell their homes, refinance
or cash out some of their home equity, Mr. Harding said, is just before
the bank takes title to the property, because that is the point of
greatest neglect.
After that point, Mr. Harding said, many lenders will at least maintain
the property’s appearance well enough to attract prospective buyers.
OF course, the best time to try to sell a home or convert equity into
cash is when neighbors are on sound financial footing, though it may
not be easy to determine.
Job loss is the biggest cause of mortgage default, according to
industry experts, so if a neighbor becomes unemployed, you should
probably start your own clock ticking.
For those living outside the immediate vicinity of the foreclosure, but
still in the neighborhood, Mr. Harding said home values typically
bottom out around the time when the bank actually sells the home.
“My advice would be to try to ride that out, not panic, and know that
this is the peak effect from lower-priced competition,” he said.
Mr. Harding said that banks, municipalities and the federal government
are justified in financing foreclosure-avoidance programs, but not if
they help homeowners just barely afford to stay in their homes. In such
situations, neighboring homes could still see values drop.
“You want to offer help at a level at which people can still do
critical maintenance to the property,” he said.
Connecticut Mortgages: 1 In 17 In
Foreclosure Or Overdue
The Hartford Courant
By KENNETH R. GOSSELIN
August 21, 2009
Foreclosures and seriously delinquent home loans in Connecticut have
jumped to their highest level in at least 30 years as unemployment
increasingly hurts homeowners with traditional mortgages.
The state had 31,979 residential mortgages either in foreclosure or 90
or more days past due, according to a report Thursday from the Mortgage
Bankers Association. That's equal to 6 percent of all home loans as of
June 30, or one mortgage in every 17.
The foreclosure figure rose from 5.3 percent — or one mortgage in every
20 — as of March 31, but was still lower than the nearly 8 percent for
the nation.
Until unemployment levels start to drop, economists are expecting that
foreclosures will continue to increase in coming months. And an uptick
in employment is still months away by some estimations and may not come
until well into next year. It isn't clear by how much Connecticut could
lag the nation in an economic recovery.
"If someone is hanging on by their fingernails right now and hasn't
been called back to work and is falling behind on the mortgage, it's
very difficult to see any relief for them," said Nicholas S. Perna,
economic adviser to Webster Bank. "The recovery may come too late for
them."
Foreclosures earlier in the recession largely hit homeowners who were
marginal buyers, financing their houses through subprime mortgages. Now
many families with traditional mortgages who didn't overextend
themselves are fueling the trend, facing the loss of their homes
because of layoffs.
"The housing markets are going to remain weak until we get some
traction in the labor market," said Donald L. Klepper-Smith, an
economist at DataCore Partners Inc. in New Haven. "It's that simple."
A recovery in home prices could help struggling homeowners, but that's
likely to come some months after jobs begin to return. Rising home
prices help homeowners sell or refinance because the value of their
property has a better chance of being more than they owe on the
mortgage.
Since Connecticut slipped into recession, the state has lost 76,000
jobs and many expect that number to increase to 100,000 over the next
year, even though monthly job losses appear to be moderating.
There have been some encouraging signs for the state's housing market
recently. Sales of single-family houses in Greater Hartford rose in
July for the first time in nearly two years, showing that buyers are
tiptoeing back into the market, attracted by lower prices.
And not all homeowners in foreclosure end up losing their homes.
Since it began in July 2008, the state's foreclosure mediation program,
administered through the courts, has helped 2,078 borrowers reach
agreements with lenders and loan servicers to stay in their homes.
That's 62 percent of the mediation cases closed as of June 30. Of the
agreements made, 1,391, or 42 percent, involved new terms such as lower
interest rates.
While that is upbeat news, the number of homeowners in trouble isn't
abating, said Roberta Palmer, the mediation program's manager.
"The mediators don't see any slowdown," Palmer said.
Connecticut has been spared the brunt of the foreclosure crisis and is
not nearly as hard hit as Arizona, California, Florida and Nevada, the
four states most heavily influencing the national foreclosure and
delinquency numbers.
Although mortgages in foreclosure or seriously delinquent are a gauge
of borrowers most at risk of losing their homes, the numbers are even
higher when including mortgages that are 30 or 60 days late.
Nationally, 13.1 percent of all residential loans are late or in
foreclosure, according to the Mortgage Bankers Association; that figure
in Connecticut is 10.8 percent.
Mortgage
Delinquencies Hit Record High in Q2 NYTIMES
By THE ASSOCIATED PRESS August
20, 2009Filed at 10:00 a.m. ET
WASHINGTON (AP) -- An industry group
says a record of more than 13 percent of American homeowners with a
mortgage are either behind on their payments or in foreclosure as the
recession throws more people out of work.
The Mortgage Bankers Association's
report Thursday provided more evidence that the source of distress in
the U.S. mortgage market has shifted from shady subprime loans with
adjustable rates to traditional fixed-rate mortgages.
One in three new foreclosures
between April and June was a prime, fixed-rate loan, up from one in
five a year earlier. Last year, subprime adjustable-rate loans were the
largest share of foreclosures.
Delinquent Mortgages Hit Record In 2nd Q DAY
By EILEEN AJ CONNELLY, Associated Press Published on 8/18/2009
New York - The delinquency
rate on U.S. mortgage loans hit an all-time high in the second quarter,
but the pace of growth for the rate slowed, a possible sign the
mortgage crisis may be about to turn the corner.
Data provided by credit reporting
agency TransUnion shows the ratio of mortgage holders who are 60 days
or more behind on their payments increased for the 10th straight
quarter, to 5.81 percent nationwide for the three months ended June 30.
That's up 65 percent, from 3.53
percent, in the 2008 second quarter.
Delinquency of 60 days is considered
a precursor to foreclosure, because of the difficulty homeowners would
have coming up with two back payments to bring themselves current.
While the delinquency rate hit a new
high, however, the increase from the first quarter to the second was
11.3 percent. In the two prior quarters, the rate jumped nearly 16
percent.
That slowdown may be a good sign,
said FJ Guarrera, vice president of TransUnion's financial services
division. “We have reason to be cautiously optimistic,” he said.
While there's no way to know exactly
why the pace of growth is slowing, Guarrera said, it appears that
programs aimed at helping distressed homeowners from both the
government and mortgage lenders are beginning to help. In addition, he
said, consumers are being more careful with their spending.
For the second quarter, Nevada,
Florida, Arizona and California remained the four states with the
highest delinquency rates, mirroring the locations where foreclosures
are the highest. Nevada's delinquency rate spiked to 13.8 percent, from
11.6 percent in the first quarter and 6.63 percent in the 2008 second
quarter.
In Florida, the delinquency rate
rose to 12.3 percent, from 11 percent in the first quarter, and 6.47
percent in the 2008 second quarter.
TransUnion culls its database of 27
million consumer records to produce the statistics.
North Dakota and South Dakota
remained the states with the lowest delinquency rates. North Dakota's
rate actually edged down a hundredth of a percent, to 1.5 percent.
Ohio, Idaho and Connecticut also saw decreases from the first quarter
to the second.
Guarrera saw particular importance
in the statistics for Ohio, where delinquency edged down to 4.57
percent from 4.58 percent in the first quarter.
The Ohio rate remains up
substantially from the 2008 second quarter, when it stood at 3.77
percent, but the quarter-over-quarter decline, while small, was
significant, he said.
”I believe this is a precursor to
recovery,” Guarrera stated, noting that the recession was felt first in
the Rust Belt and Sun Belt states. “We see this as a really good sign.”
Not all of the news was positive,
Wyoming and Utah, two states that have been far from the center of the
foreclosure crisis, saw their delinquency rates jump the most, to 2.85
percent and 4.68 percent. RealtyTrac: July foreclosures rose 7
percent from June; lenders slow to modify loans
AP Real Estate Writer
ALAN ZIBEL
1:50 PM EDT, August 13, 2009
WASHINGTON (AP) — The number of U.S. households on the verge of losing
their homes rose 7 percent from June to July, as the escalating
foreclosure crisis continued to outpace government efforts to limit the
damage.
Foreclosure filings were up 32 percent from the same month last year,
RealtyTrac Inc. said Thursday. More than 360,000 households, or one in
every 355 homes, received a foreclosure-related notice, such as a
notice of default or trustee's sale. That's the highest monthly level
since the foreclosure-listing firm began publishing the data more than
four years ago.
Banks repossessed more than 87,000 homes in July, up from about 79,000
homes a month earlier.
Nevada had the nation's highest foreclosure rate for the 31st-straight
month, followed by California, Arizona, Florida and Utah. Rounding out
the top 10 were Idaho, Georgia, Illinois, Colorado and Oregon. Among
cities, Las Vegas had the highest rate, followed by the California
cities of Stockton and Modesto.
While there have been numerous recent signs that the ailing U.S.
housing market is finally stabilizing after three years of plunging
prices, foreclosures remain a big concern. Foreclosures are typically
sold at a deep discount, hurting neighbors' home values.
The mortgage industry has been slow to adapt to the surge in
foreclosures. Many lenders have needed government prodding to get up to
speed with the Obama administration's plan to stem foreclosures.
The Treasury Department said last week that banks have extended only
400,000 offers to 2.7 million eligible borrowers who are more than two
months behind on their payments. More than 235,000, or 9 percent, those
borrowers have enrolled in three-month trials in which their monthly
payments are reduced.
"The volume of loans that are in distress simply overwhelms" those
efforts, said Rick Sharga, RealtyTrac's senior vice president for
marketing.
Copyright 2009 Associated Press. All
rights reserved. This material may not be published, broadcast,
rewritten, or redistributed. Sector Snap: Toll Bros. Sales Goose
Homebuilders
NYTIMES
By THE ASSOCIATED PRESS
Filed at 1:32 p.m. ET
August 12, 2009
NEW YORK (AP) -- Homebuilder stocks joined the market rally Wednesday
after luxury builder Toll Brothers Inc. posted its first annual
increase in signed contracts in four years.
The company said new home contracts for the fiscal third quarter rose 3
percent from the prior year, and 44 percent from the fiscal second
quarter. The company was even able to scale back some of the incentives
it's been offering buyers to spur sales.
Among the bright spots in the report was Toll Brother's lowest
cancellation rate in three years -- 9 percent.
Leading the sector higher, Toll Brothers shares gained $2.63, or 12.9
percent, to $23.12, with volume more than twice normal in afternoon
trading.
''We believe the key question is whether this marks a turning point for
TOL and/or the broader industry or just a nice spike that may not
portend a sharply rising trend,'' Stifel Nicolaus analyst Michael
Widner wrote, using the company's New York Stock Exchange ticker symbol.
He noted that while the spike is better than expected, ''we can't help
contemplating that we're talking about roughly 300 incremental home
sales here.
''Was this a spike of a few hundred buyers being lured off the fence
through strong marketing efforts coupled with financial incentives, tax
rebates, and financing options, or has the market genuinely turned the
corner?'' Widner asked. While he saw the results as strong, he
encouraged investors not to chase a rally, noting that the luxury
sector has been hit harder than the broader housing market.
Nevertheless, investors bought into the sector on the news.
Shares of Beazer Homes Inc. added 35 cents, or 9.6 percent, to $4.
Hovnanian Enterprises Inc. gained 23 cents, or 5.9 percent, to $4.15
and Centex Corp. shares added 53 cents, or 4.4 percent, to $12.46.
Elsewhere, Lennar Corp. gained 59 cents, or 4.5 percent, to $13.59,
while Pulte Homes Inc. added 50 cents, or 4.1 percent, to $12.82.
KB Home gained 41 cents, or 2.3 percent, to $18.18 and DR Horton Inc.
added 34 cents, or 2.6 percent, to $13.45.
Markets Rise on Signs of Economic Growth
NYTIMES
By JACK HEALY August 4, 2009
For thousands of investors whose portfolios are benchmarked to the
Standard & Poor’s 500-stock index, recovery was a thing with four
digits on Monday.
The closely watched stock index crossed 1,000 points for the first time
since early November, fueling hopes that stock markets would continue
to march higher as the recession showed signs of reaching a bottom.
Like other market gauges, the S.&P. 500 is still off more than a
third from its all-time highs, but it has rallied strongly off its
bear-market lows and is now up more than 10 percent for the year.
The day’s activity added more momentum to a three-week surge that
lifted the Dow above 9,000 points and kindled optimism that banks and
major corporations could still turn profits, even as the toll of job
losses mounts and the prospects for economic growth coming out of the
recession remain uncertain.
As Wall Street headed higher for another day, waves of optimism about
global industry lifted financial markets and lifted the price of oil,
grains metals and other commodities, as traders bet that a recovery
would lift global consumption and revive the demand for raw materials.
Automakers were reaping a boost in sales from the government’s “cash
for clunkers” program, which gives credits to motorists who trade in
their cars for new, more fuel efficient ones. The Ford Motor Company
reported that sales rose 2.3 percent in July, its first monthly sales
increase since 2007.
Shares of Ford were up more than 6 percent, and American-traded shares
of foreign car companies Toyota, Nissan and Honda were all higher.
Signs of improvement the industrial sectors of China, Europe and
Britain bolstered stock markets in Asia, London, Paris and Frankfurt.
And more positive readings on manufacturing and the housing market in
the United States propelled stock markets on Wall Street toward their
highest levels of the year.
At 1:25 p.m. the Dow Jones industrial average was about 100 points or
1.1 percent higher, and the S.&P. 500 was up by 1.3 percent,
hovering just above 1,000 points. The Nasdaq composite index was
crossed above the 2,000-point threshold, a line it had not breached
since early October.
Leading the way were companies that sell oil and natural gas, and those
that manufacture basic materials like steel, paper products or plastic.
Investors rushed to buy their shares as the price of oil rose more than
$2, to nearly $72 a barrel, and the prices of gold and copper also
surged.
A
surprising, though slender, 0.3 percent increase in construction
spending in June also leavened the mood on Wall Street and offered
optimistic forecasters another sign that the housing market was near
bottom, if not already staging a recovery.
Builders spent more money in June to construct new homes, hotel
projects, commercial centers and other projects, the Commerce
Department reported on Monday. Part of the overall rise came from a 1
percent increase in government construction spending as stimulus
projects began to get under way.
And the Institute for Supply Management reported that manufacturing
activity contracted at its slowest pace since last August as businesses
reported more orders and higher production than previous months, and
improvements in employment conditions. The group’s manufacturing index
rose to 48.9 in July, from 44.8 a month earlier.
“This is good news, though we still can’t be sure if further sustained
strength is possible in the face of continued consumer deleveraging,”
said Ian Shepherdson, chief United States economist at High Frequency
Economics. “This could just be a catch-up after the post-Lehman
disaster.” Conn. sees jump in housing
permits
CTPOST
Updated: 07/29/2009 08:40:10 PM EDT
HARTFORD -- A spike in new housing permits in Connecticut has sparked
some optimism among government and construction industry officials
about the state's economic future.
The 128 cities and towns that report monthly data say they handed out
403 permits for new housing units in June, more than double the number
for May and the most since November.
But the numbers are still down compared with last year. June's total is
a drop of nearly 46 percent compared with June 2008. The 1,430 new
housing permits issued in the first six months of this year is also
down 46 percent from the same period last year.
The president of the Home Builders Association of Connecticut, George
LaCava, said the June number is a good sign, but not necessarily a sign
of a rebound. U.S. HOME
PRICES Slide in Home Prices Is Slowing Down, Index
Shows
NYTIMES
By DAVID STREITFELD
July 29, 2009
The long slide in housing prices is continuing to brake, figures
released Tuesday indicate.
For the fourth consecutive month, there was modest improvement in home
prices in May, according to Standard & Poor’s Case-Shiller Home
Price Index, a closely watched measure of the market.
The index of 20 metropolitan areas had an annual decline of 17.1
percent in May from the same month in 2008, an improvement over April’s
18.1 percent fall. Prices improved in 13 of the 20 cities in the
survey, with Cleveland reporting the largest increase, 4.1 percent,
followed by Dallas with 1.9 percent and Boston 1.6 percent. Several
other cities — Chicago, Denver, Minneapolis, San Francisco and
Washington — reported increases of more than 1 percent.
Five cities reported a drop in prices, led by Las Vegas with 2.6
percent.
The 10-city index also noted an improvement in prices, with a 16.8
decline in May compared with the month a year ago, after a 18 percent
drop in April.
While the numbers are still grim, the important thing is the direction
they are heading, Wells Fargo chief economist John E. Silvia said.
“Recession is over, economy is recovering — let’s look forward and stop
the backward-looking focus,” he wrote in a research note.
Before bottoming in January, the Case-Shiller index showed 16
consecutive months of record annual declines. From its peak three years
ago, the index is down about a third, pushing prices in major cities
back to where they were in 2003.
Noting that 13 of the 20 cities in the index reported positive returns
compared with April, David M. Blitzer, index chairman at Standard &
Poor’s, said that “these are the first time we have seen broad
increases in home prices in 34 months. This could be an indication that
home price declines are finally stabilizing.”
A housing market where prices are merely flat — never mind one that
rises — nevertheless appears a long way off. Many analysts think the
most hopeful scenario is that prices start to rise modestly late next
year. An economy that double dips into another recession would push
that date even further back. NEW HOME
SALES
Should be a leading indicator...
New-home
purchases fall, 2011 worst ever for sales
YAHOO
Associated Press
By DEREK KRAVITZ
26 January 2012
WASHINGTON (AP) — Fewer Americans bought new homes in December. The
decline made 2011 the worst year for new-home sales on records dating
back nearly half a century.
The Commerce Department said Thursday new-home sales fell 2.2 percent
last month to a seasonally adjusted annual pace of 307,000. The pace is
less than half the 700,000 that economists say must be sold in a
healthy economy.
About 302,000 new homes were sold last year. That's less than the
323,000 sold in 2010, making last year's sales the worst on records
dating back to 1963. And it coincides with a report last week that said
2011 was the weakest year for single-family home construction on record.
The median sales prices for new homes dropped in December to $210,300.
Builders continued to slash price to stay competitive in the depressed
market.
Still, sales of new homes rose in the final quarter of 2011, supporting
other signs of a slow turnaround that began at the end of the year.
Sales of previously occupied homes rose in December for a third
straight month. Mortgage rates have never been lower. Homebuilders are
slightly more hopeful because more people are saying they might
consider buying this year. And home construction picked up in the final
quarter of last year.
"Although this decline was unexpected, it does not change the story
that housing has likely bottomed," said Jennifer H. Lee, senior
economist at BMO Capital Markets.
Ian Shepherdson, chief economist at High Frequency Economics, said
easier lending requirements, historically low mortgage rates and
improved hiring all point to consistent, albeit slow, rises in sales in
the coming months.
"A sustained rise in new home sales is imminent," he said.
"Homebuilders say so too, and they should know."
Hiring is critical to a housing rebound. The unemployment rate fell in
December to its lowest level in nearly three years after the sixth
straight month of solid job growth. Economists caution that
housing is a long way from fully recovering. Builders have stopped
working on many projects because it's been hard for them to get
financing or to compete with cheaper resale homes. For many Americans,
buying a home remains too big a risk more than four years after the
housing bubble burst.
Though new-home sales represent less than 10 percent of the housing
market, they have an outsize impact on the economy. Each home built
creates an average of three jobs for a year and generates about $90,000
in tax revenue, according to the National Association of Home Builders.
A key reason for the dismal 2011 sales is that builders must compete
with foreclosures and short sales — when lenders accept less for a
house than what is owed on the mortgage
Builders ended 2011 with a third straight year of dismal home
construction and the worst on record for single-family home building.
But in a hopeful sign, single-family home construction, which makes up
70 percent of the market, increased in each of the last three months. New home
sales plunge to record low in
February
YAHOO
23 March 2011
WASHINGTON (Reuters) – New single-family home sales unexpectedly fell
in February to hit a record low and prices were the lowest since
December 2003, showing the housing market slide was deepening.
The Commerce Department said on Wednesday sales dropped 16.9 percent to
a seasonally adjusted 250,000 unit annual rate, the lowest since
records began in 1963, after an upwardly revised 301,000-unit pace in
January.
Sales plunged to all-time lows in three of the four regions last month.
Economists polled by Reuters had forecast new home sales edging up to a
290,000-unit pace last month from a previously reported 284,000 unit
rate.
"It's been a disappointing February for home sales and there are no
signs of a turnaround," said Kurt Karl, chief U.S. economist at Swiss
Re in New York.
"We're going to have a continuing slowdown in the next few months, but
people will start to feel better in the second half of the year and
construction and sales should do better later this year and into next
year."
U.S. stock indexes fell on the data, while government debt prices rose
marginally. The dollar was little changed.
Compared to February last year sales were down 28 percent.
An oversupply of homes exacerbated by an increasing flood of properties
falling into foreclosure is frustrating recovery in the housing market.
Data on Monday showed a steep drop in sales of previously owned homes
in February, with prices tumbling to a near nine-year low.
HOUSE PRICES PLUNGE
The median sales price for a new home plunged 13.9 percent last month
to $202,100, the lowest since December 2003. Compared with February
last year, the median price fell 8.9 percent. Persistent price declines
could dampen hopes of a pick-up in sales during spring.
In the face of stiff competition from foreclosed properties, which
typically sell well below market value, builders are holding back on
new construction.
At February's sales pace, the supply of new homes on the market rose to
8.9 months' worth, the highest since August, from 7.4 months' worth in
January.
There were 186,000 new homes available for sale last month, matching
the prior month's inventory. That was still the smallest supply of home
since 1967.
Despite lean inventories, new home sales will likely continue to bounce
along the bottom for a while until the glut of previously owned homes
is whittled down. New home sales account for less than 10 percent of
overall sales.
According to the National Association of Realtors, new home prices have
been running 45 percent higher than existing home prices, a premium
that is historically about 15 percent, indicating previously owned
homes are selling well below the cost of construction.
Separately, the Mortgage Bankers Association said applications for home
loans rebounded 2.7 percent last week. New-home sales plunge 33 pct with tax
credits gone YAHOO
By ALAN ZIBEL, AP Real Estate Writer
23 June 2010
WASHINGTON – Sales of new homes collapsed in May, sinking 33 percent to
the lowest level on record as potential buyers stopped shopping for
homes once they could no longer receive government tax credits.
The bleak report from the Commerce Department is the first sign of how
the end of federal tax credits could weigh on the nation's housing
market.
The credits expired April 30. That's when a new-home buyer would have
had to sign a contract to qualify.
"We fear that the appetite to buy a home has disappeared alongside the
tax credit," Paul Dales, U.S. economist with Capital Economics," wrote
in a note. "After all, unemployment remains high, job security is low
and credit conditions are tight."
New-home sales in May fell from April to a seasonally adjusted annual
sales pace of 300,000, the government said Wednesday. That was the
slowest sales pace on records dating back to 1963. And it's the largest
monthly drop on record. Sales have now sunk 78 percent from their peak
in July 2005.
Analysts were startled by the depth of the sales drop.
"We all knew there would be a housing hangover from the expiration of
the tax credit," wrote Mike Larson, real estate and interest rate
analyst at Weiss Research. "But this decline takes your breath away."
Economists surveyed by Thomson Reuters had expected a May sales pace of
410,000. April's sales pace was revised downward to 446,000.
The government offered an $8,000 credit for first-time buyers. Current
homeowners who buy and move into another property could receive up to
$6,500.
New-home sales fell nationwide from April's levels. They dropped 53
percent from a month earlier in the West and 33 percent in the
Northeast. Sales in the South dropped 25 percent. The Midwest posted a
24 percent decline.
Builders have sharply scaled back construction in the face of a severe
housing market bust. The number of new homes up for sale in March fell
0.5 percent to 213,000, the lowest level in nearly 40 years. But due to
the sluggish sales pace in May, it would still take 8.5 months to
exhaust that supply, above a healthy level of about six months.
The median sales price in May was $200,900. That was down 9.6 percent
from a year earlier and down 1 percent from April.
New-homes sales made up about 7 percent of the housing market last
year. That's down from about 15 percent before the bust.
The drop in new-home sales means fewer jobs in the construction
industry, which normally powers economic recoveries but has remained
lackluster this time.
Each new home built creates, on average, the equivalent of three jobs
for a year and generates about $90,000 in taxes paid to local and
federal authorities, according to the National Association of Home
Builders. The impact is felt across multiple industries, from makers of
faucets and dishwashers to lumber yards. New home sales hit record low in January
YAHOO
By MARTIN CRUTSINGER, AP Economics Writer
Feb. 24, 2010
WASHINGTON – Sales of new homes plunged to a record low in January,
underscoring the formidable challenges facing the housing industry as
it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales dropped
11.2 percent last month to a seasonally adjusted annual sales pace of
309,000 units, the lowest level on records going back nearly a half
century. The big drop was a surprise to economists who had expected
sales would rise about 5 percent over December's pace.
The January decline will heighten fears about the fledgling recovery in
housing. Economists were already worried that an improvement in sales
in the second half of last year could falter as various government
support programs are withdrawn.
The sales decline in January marked the third straight monthly drop
following decreases of 3.9 percent in December and 9.5 percent in
November.
January's weakness was evident in all regions except the Midwest, where
sales posted a 2.1 percent increase. Sales were down 35 percent in the
Northeast, 12 percent in the West and almost 10 percent in the South.
The drop in sales pushed the median sales price down to $203.500. That
was down 5.6 percent from December's median sales price of $215,600,
and off 2.4 percent from year-ago prices.
New home sales for all of 2009 had fallen by almost 23 percent to
374,000, the worst year on record. The National Association of Home
Builders is forecasting that sales will rise to more than 500,000 sales
this year, an improvement from 2009 but still far below the boom years
of 2003 through 2006 when builders clocked more than 1 million new home
sales per year.
The unexpectedly large drop in January activity will increase concerns
that the housing rebound could falter in coming months as the
government withdraws the support it has used to try to bolster the
housing market, which stood at the epicenter of the country's overall
recession, the worst downturn since the 1930s.
A $1.25 trillion program from the Federal Reserve which has held down
mortgage rates is set to end March 31 and tax credits to bolster home
buying are scheduled to expire at the end of April.
First-time home buyers could qualify for a credit of up to $8,000 while
homeowners who have lived in their current properties for at least five
years could claim a tax credit of up to $6,500 if they decided to move
into another home.
Though the overall economy started growing again this past summer,
economists are worried because unemployment remains high. This weakness
is causing consumers to shy away spending, especially on big-ticket
items such as homes.
The Conference Board reported Tuesday that its Consumer Confidence
Index fell almost 11 points to 46 in February, pushing the index down
to its lowest reading since last April. At 46, the index is a long way
from the 90 reading that economists generally view as depicting healthy
consumer attitudes. November new home sales
sink 11 percent
YAHOO
By ALAN ZIBEL, AP Real Estate Writer
Dec. 23, 2009
WASHINGTON – Sales of new homes plunged unexpectedly last month to the
lowest level since April, a sign the housing market recovery will be
rocky.
The 11 percent slump from October's pace shows that consumers are
taking their time following an extension of a deadline for first-time
buyers to qualify for a tax credit. The incentive was set to expire at
the end of November, but Congress pushed back the date to April 30 and
expanded the program to include current homeowners who relocate.
"They don't have to act today," said David Crowe, chief economist at
the National Association of Home Builders, who called the results
"pretty awful."
New home sales data are a better indicator of future real estate than
sales of previously occupied homes, but capture a smaller slice of the
market. The new home figures tally sales agreements signed in November,
while home resale numbers reflect contracts signed over the summer that
were completed in November.
So while home resales rose 7 percent last month, the National
Association of Realtors reported Tuesday, most economists expect
completed sales to decline during the winter months.
"Buyer traffic is likely to be flat until spring," predicted Mark
Vitner, senior economist with Wells Fargo Securities.
Despite the poor showing from new home buyers, the housing market has
been recovering from the worst downturn in decades, largely due to a
massive infusion of federal assistance. New home sales are up 8 percent
from the bottom in January but 74 percent below the peak in July 2005.
Compared with November last year, sales were off 9 percent.
The Commerce Department said sales hit a seasonally adjusted annual
rate of 355,000 last month, off from a downwardly revised 400,000 pace
in October. Economists surveyed by Thomson Reuters had expected 440,000.
The median sales price of $217,400 was down nearly 2 percent from
$221,600 a year earlier, but up about 4 percent from October's level of
$209,400.
Builders clearly saw the drop coming: the National Association of Home
Builders said last week its index of industry confidence fell to the
lowest level since June. The trade group blamed high unemployment and a
slow economic recovery that are stifling demand.
The only strong region was the Midwest, where sales rose 21 percent.
Sales fell by 21 percent in the South, 9 percent in the West and 3
percent in the Northeast.
Builders had 235,000 new homes for sale nationwide at the end of
November. That was down 2 percent from October and the lowest inventory
level since April 1971. At the current weak sales pace, that still
represents nearly eight months of supply.
Robert Toll, CEO of luxury builder Toll Brothers Inc. said earlier this
month demand has been "choppy" after several strong months in the
spring and summer.
"You just have to bite the finger, be patient, and wait until you see
what comes out in the latter part of January, all of February and in
the early part of March," he said. New home sales unexpectedly tumble
YAHOO
By Lisa Lambert
October 28, 2009
WASHINGTON (Reuters) – Sales of new U.S. homes
unexpectedly tumbled in September, their first drop in six months,
underscoring the hazards to an economic recovery that businesses
appeared to be banking on.
New single-family home sales fell 3.6 percent to a 402,000 unit annual
pace from a downwardly revised 417,000 units in August, the Commerce
Department said on Wednesday. Analysts polled by Reuters had expected
sales to rise to a 440,000 unit pace from August's previously reported
429,000.
A separate report from the Mortgage Bankers Association on Wednesday
showed demand for mortgages has fallen for the past three weeks as
buyers move to the sidelines ahead of the November 30 expiration of a
popular home-buyers' tax credit.
The housing data represented a road bump in a recovery that otherwise
appears to be widening. Another report from the Commerce Department
showed that new orders for long-lasting U.S. manufactured goods rose 1
percent in September as business stepped-up investment plans.
"One month is obviously not a trend and I think there is plenty of
evidence that things are turning around. I still believe the economy
has hit bottom and is on the way up, but it will be a long, slow
process," said Mark Bonhard, an investment advisor at Dawson Wealth
Management in Cleveland, Ohio.
U.S. stock indexes extended losses when the data was released, while
U.S. Treasury prices added to gains and the U.S. dollar rose against
the euro.
Despite the drop in sales, the number of new homes for sale at the end
of the month shrank to its smallest in 27 years, leaving the supply of
homes available at 7.5 months' worth.
The median sales price rose in September to $204,800 from $199,900,
while the average sales price rose to $282,600 from $265,500.
The new home-buyer tax credit affected recent housing market trends,
Cary Leahey, economist at Decision Economics in New York, said.
The $8,000 credit, which expires on November 30, helped lift the
housing market from its deepest downturn since the Great Depression.
U.S. lawmakers are considering extending it.
"There are some distortions because of the new home-buyer tax credit,
but we can say housing sales have bottomed," Leahy said. "Some are
afraid housing will fade in 2010. That will not happen unless the labor
market fades or does not improve."
The Mortgage Bankers Association said its mortgage applications index
fell 12.3 percent to 562.3 in the week ended October 23, with purchase
applications the weakest since mid-May and refinancing requests at a
two-month low.
Eligible borrowers who applied last week would unlikely be able to
close their loan by the scheduled November 30 expiration of the tax
credit, industry experts said.
DURABLES GOODS ORDERS UP
The increase in new orders for long-lasting U.S. manufactured goods met
Wall Street expectations and was the second increase in the last three
months, offering some hope that the economic recovery will continue.
However, compared with a year ago, orders were down 24.1 percent.
"In a recovering economy, you'll get three steps forward and then two
steps back. That's what you're seeing here," said David Katz, chief
investment officer at Matrix Asset Advisors in New York. "This data
point is positive."
Durable goods orders are a leading indicator of manufacturing, which in
turn provides a good measure of overall business health.
The report shows that durable goods orders are off their previous lows
but have not reached a vigorous pace, said Michael Moran, chief
economist at Daiwa Securities America in New York.
"There is still a good bit of uncertainty on the part of business
executives about the economic outlook and as a result we are seeing
cautious behavior," he said.
Shipments of durable goods rose 0.8 percent in September and have been
up for three of the last four months, while inventories fell for the
ninth month in a row, by 1 percent.
There are concerns that the continued paring of inventories will be a
drag on economic growth. The Commerce Department will report
third-quarter gross domestic product on Thursday, and analysts are
expecting a 3.3 percent rise, based on rebounds in consumer spending
and the housing market. July New US Home Sales Up 9.6 Percent
NYTIMES
By THE ASSOCIATED PRESS
Filed at 10:03 a.m. ET
August 26, 2009
WASHINGTON (AP) -- New U.S. home sales surged 9.6 percent in July,
rising for the fourth straight month and beating expectations as the
housing market marches steadily back from its historic downturn.
The Commerce Department says sales rose to a seasonally adjusted annual
rate of 433,000 from an upwardly revised June rate of 395,000.
It was the strongest sales pace since September and exceeded the
forecasts of economists surveyed by Thomson Reuters, who expected a
pace of 390,000 units. The last time sales rose so dramatically was in
February 2005.
The median sales price of $210,100, however, was still down 11.5
percent from $237,300 a year earlier.
New U.S. Home Sales Rise Sharply
as
Prices Fall
NYTIMES
By JACK HEALY
July 28, 2009
Sales of new homes in the United States posted their largest monthly
gain in eight years in June, the government reported on Monday, a sign
that the housing market is bottoming as buyers take advantage of lower
prices.
The Commerce Department reported that new single-family home sales rose
11 percent in June, an increase that dwarfed economists’ expectations
of a 3 percent increase. The pace of home sales rose to a seasonally
adjusted rate of 384,000 a year, the highest level since November.
Despite the monthly increase, sales of new homes were still down 21
percent from June 2008, and the market is still swamped by a glut of
for-sale houses and foreclosed properties.
“These are still really bad numbers,” an economist at IHS Global
Insight, Patrick Newport, said. “The market just couldn’t have dropped
much further.” As sales rose, median prices of new homes continued to
fall, slipping to $206,200 from $232,100 in June a year ago.
The figures were the latest evidence that a three-year slump in the
country’s housing market was leveling off as prices fell back and some
builders and buyers began to step tentatively back into the market.
Housing starts rose 3.6 percent in June from a month earlier, and sales
of previously owned homes also rose for another month.
“Sales are picking up a little,” a senior economist at 4Cast, David
Sloan, said. “Whether it’s going to pick up any momentum is really the
key. I think we have to be doubtful about that.”
Although new-home sales have risen for three months, many economists
worry that rising unemployment, stagnant wages and continued tightness
in lending markets will weigh down the housing market for the rest of
the year.
“There’s still worries that the lack of employment growth and lack of
wage growth is restraining consumer income, and that’s going to ensure
that the recovery is quite modest,” Mr. Sloan said.
Page
last updated at 17:29 GMT, Friday, 17 July 2009 18:29 UK
New US home
starts surge in June
The construction of new homes in the
US rose 3.6% between May and June to the highest level in seven months,
official figures have shown.
This is the second month in a row that housing starts have
risen following a post-war low in April.
Compared with the same month a year ago, however, June starts
were down 46%, the Commerce Department said.
The number of single family homes being built jumped 14.4% in
June, the biggest jump in over four years.
'Genuine surprise'
The number of new homes built totalled 582,000, many more
than analysts had expected.
Figures for May were also revised upwards, from 532,000 to
562,000.
"These figures look like a genuine upward surprise, and
support our
view that housing construction activity is bottoming out," said Dean
Maki at Barclays Capital.
For the April to June months, Mr Maki added that single
family starts saw the biggest quarterly increase since the early 1990s.
The
number of permits to break ground - considered an indicator of
confidence in the building sector - climbed to its highest level since
December last year.
Completions down
Some analysts, however, urged caution in the wake of the
stronger-than-expected data.
"It is too soon to call a bottom to the housing market in the
US," said the Centre for Economics and Business Research.
William
O'Donnell, head treasury strategist at RBS Securities, argued that:
"This is another piece of data for those seeing the recession ending
soon."
"But housing starts are still within the range of the past
six months and the completion rate is still down," he said.
U.S. HOME
SALES
- EXISTING HOMES
October existing home sales rise 1.4 percent
YAHOO
21 November 2011
WASHINGTON (Reuters) – U.S. existing home sales unexpectedly rose in
October as low interest rates for mortgages and rising rents led more
homebuyers into the market, the National Association of Realtors said
on Monday.
Sales climbed 1.4 percent to an annual rate of 4.97 million units from
September's revised rate of 4.90 million, the NAR said. Forecasters in
a Reuters poll had expected the annual rate to fall to 4.8 million.
Despite the modest increase in sales, the median sales price for
existing homes was 4.7 percent lower in October than it was a year
earlier.
NAR chief economist Lawrence Yun said the increase in sales comes amid
"several improving factors that generally lead to higher home sales
such as job creation, rising rents and high affordability conditions."
The U.S. Federal Reserve has held short-term interest rates at nearly
zero since 2008 and has expanded its balance sheet in a bid to get
credit to businesses and households.
That has helped bring mortgage rates to near-record lows.
Still, while many other sectors of the economy have found their feet,
housing continues to lag abysmally, held back by high rates of
foreclosure and homes that have dropped dramatically in value.
Home sales tumble, prices near 9-year
low
YAHOO
By Lucia Mutikani
WASHINGTON (Reuters) – Sales of previously owned U.S. homes plunged in
February and prices hit their lowest level in nearly nine years,
implying a housing market recovery was still a long way off.
The National Association of Realtors said on Monday sales fell 9.6
percent month over month to an annual rate of 4.88 million units,
snapping three straight months of gains. The percentage decline was the
largest since July.
The weak sales were the latest evidence of the malaise in the housing
sector and confirmed it would remain outside the strengthening and
broadening economic recovery.
"The housing market is still very depressed and a major drag on the
economy, especially household net worth," said Chris Christopher, a
senior economist at IHS Global Insight in Lexington, Massachusetts.
Economists had expected a decline of only 4 percent to a 5.15
million-unit pace. The actual drop was greater than even the most
pessimistic forecast in a Reuters survey of 53 economists.
Analysts said harsh winter weather in January could have curbed
February sales. Existing home sales are measured when contracts are
closed and last month's sales decline was telegraphed by a drop in
January's pending contracts.
The Realtors' group also said tight credit conditions and home
appraisals that fell short of agreed-upon selling prices weighed on
sales.
U.S. financial markets largely ignored the data. U.S. stocks rose
sharply, partly on news of a bid by AT&T for Deutsche Telekom AG's
T-Mobile USA and growing hopes Japan would get its nuclear crisis under
control.
Prices for U.S. government debt fell after the Treasury said it would
begin selling $142 billion in mortgage-backed securities it had
acquired to help tame the financial crisis. The dollar rose against the
yen on intervention fears.
PLUNGING PRICES A WORRY
Though economists cautiously hope an improving labor market will lift
home sales in the months ahead, plunging house prices could throw a
spanner in the works.
NAR said the median home price dropped 5.2 percent in February from a
year earlier to $156,100, the lowest since April 2002, in a sign of the
relentless downward pressure on prices from a market flooded with
foreclosure sales.
"If the price declines persist, even with the job market recovery, that
could hamper recovery in the housing market," the trade group's chief
economist, Lawrence Yun, said.
A glut of homes on the market and a flood of foreclosures are holding
back a recovery in the housing sector, whose collapse helped to tip the
U.S. economy into its worst recession since the 1930s.
Data last week showed a plunge in housing starts and the government on
Wednesday is expected report a marginal rise in new single family homes
in February. Home resales make up more than 90 percent of national
sales and economists said they would continue to weigh on new home
sales and building.
Foreclosures and short sales, which typically occur below market value,
accounted for 39 percent of transactions in February, the highest since
April 2009, up from 37 percent the prior month, the trade group said.
All-cash purchases made up a record 33 percent of transactions in
February.
According to the Realtors' group, new home prices have been running 45
percent higher than existing home prices, a premium that is
historically about 15 percent, indicating previously owned homes are
selling well below the cost of construction.
At February's sales pace, the supply of existing homes represented an
8.6 months' supply, up from 7.5 in January. A supply of between six and
seven months is generally considered ideal, with higher readings
pointing to lower house prices.
"Inventory is still high, about a third higher than it was
pre-recession. We are not going to see any bounce back in new home
sales until the inventory of existing home sales gets worked down,"
said Steve Blitz, a senior economist at ITG Investment Research in New
York.
"We don't even know what the inventory is. We see a visible supply but
then there is a shadow supply that comes on and off the market
depending on the time of the year. It's still a morbid market on
national level."
Sales last month fell across the board, with multifamily dwellings
declining 10 percent and single-family home units dropping 9.6 percent.
Compared with February last year, overall sales were down 2.8 percent.
While sales plunged in all regions last month, economists said the
pattern was likely to become less uniform in the months ahead, with
regions where the labor market is fairly strong showing more life than
others. 2010 weakest year for home sales since 1997 By MARTIN CRUTSINGER, AP Economics Writer
20 January 2011
WASHINGTON – The number of people who bought previously owned homes
last year fell to the lowest level in 13 years. But home sales in
December jumped to fastest pace in seven months.
The National Association of Realtors says sales dropped 4.8 percent to
4.91 million units in 2010. That was slightly lower than 2008, which
had been the weakest level since 1997.
Home prices have been depressed by a record number of foreclosures and
high unemployment. Many potential buyers held off on purchases last
year, fearful that prices hadn't bottomed out yet.
The poor year for sales ended strong in December. Buyers snapped up
homes at a seasonally adjusted annual rate of 5.28 million units, an
increase of 12.8 percent from November and the strongest sales pace
since last May.
Still, many economists believe it will take years for sales to rise to
a normal level of around 6 million units a year. And some say 2011 will
be even weaker than last year because more foreclosures are expected
and home prices are likely to keep falling through the first six months
of the year.
The foreclosure crisis has left a glut of unsold houses on the market.
That has played a major role in lowering home prices.
For December, the inventory of unsold homes stood at an 8.1 months
supply, down from 9.5 months supply in November. That represents the
amount of time it would take to sell the remaining supply of homes on
the market at the December sales pace. A normal inventory supply is six
months.
Even historically low mortgage rates have done little to boost the
sales.
The average rate on a 30-year fixed mortgage rose to 4.74 percent this
week from 4.71 percent the previous week, Freddie Mac said Thursday.
The average rate on the 15-year loan, a popular refinance option,
slipped to 4.05 percent from 4.08 percent.
The 30-year loan rate reached a 40-year low of 4.17 percent in
November, and the 15-year mortgage rate fell to 3.57 percent, the
lowest level on records dating back to 1991.
For December, sales were up in all parts of the country with the
strongest gain a 16.7 percent increase in the West. Sales rose 13
percent in the Northeast, 10.1 percent in the South and 11 percent in
the Midwest.
The median price for a home sold in December was $168,800, down 1
percent from a year ago. Existing home sales surged in December YAHOO
20 January 2011
WASHINGTON (Reuters) – U.S. home resales jumped more than expected in
December despite bad weather as sellers cut prices, offering some hope
for a sector that has been struggling to recover from its worst slump
in modern history.
Existing home sales soared 12.3 percent to an annual rate of 5.28
million units, the National Association of Realtors said on Thursday,
far surpassing forecasts for a rise to 4.85 million. Sales were down
2.9 percent compared to a year earlier.
A jump in mortgage rates may have forced some buyers into the market by
raising concern of even further increases, said Lawrence Yun, chief
economist at the NAR. Yun said he expects 2011 sales to total around
5.2 million units, with prices remaining stable.
Sales peaked above 7 million units in September 2005, as the housing
bubble reached fever pitch. They hit a 15-year low below 4 million
units in mid-2010 after the market collapsed, triggering a widespread
financial crisis.
Median home prices fell to $168,800, down from $170,200 in November and
the lowest since February 2010. That was in part because properties
considered "distressed" accounted for 36 percent of sales, up from 33
percent in November.
The U.S. economy has been growing for over a year, having emerged from
its deepest recession in generations in the summer of 2009. Gross
domestic product expanded 2.6 percent in the third quarter, not enough
to put a significant dent on the nation's elevated 9.4 percent jobless
rate.
A weak job market could thwart housing activity further by denting
consumer confidence. Still, jobless claims dropped more than
anticipated in a separate report from the Labor Department, an
encouraging sign that conditions are improving. December home sales down nearly 17 percent
YAHOO
By ALAN ZIBEL, AP Real Estate Writer
January 25, 2010
WASHINGTON – Sales of previously occupied homes took the largest
monthly drop in more than 40 years last month, sinking more
dramatically than expected after lawmakers gave buyers additional time
to use a tax credit.
The report reflects a sharp drop in demand after buyers stopped
scrambling to qualify for a tax credit of up to $8,000 for first-time
homeowners. It had been due to expire on Nov. 30. But Congress extended
the deadline until April 30 and expanded it with a new $6,500 credit
for existing homeowners who move.
"It's 'exit stage left' for first-time homebuyers," wrote Guy LeBas, an
analyst with Janney Montgomery Scott.
December's sales fell 16.7 percent to a seasonally adjusted annual rate
of 5.45 million, from an unchanged pace of 6.54 million in November,
the National Association of Realtors said Monday. Sales had been
expected to fall by about 10 percent, according to economists surveyed
by Thomson Reuters.
The report "places a large question mark over whether the recovery can
be sustained when the extended tax credit expires," wrote Paul Dales,
U.S. economist with Capital Economics.
The median sales price was $178,300, up 1.5 percent from a year earlier
and the first yearly gain since August 2007. However, some of that
increase could be due to a drop-off in purchases from first-time buyers
who tend to buy less expensive homes.
Sales are now up 21 percent from the bottom a year ago, but down 25
percent from the peak more than four years ago.
The big question hanging over the housing market this spring is whether
a tentative recovery will stumble after the government pulls back
support. The Federal Reserve's $1.25 trillion program to push down
mortgage rates is scheduled to expire at the end of March — a month
before the newly extended tax credit runs out.
Last year, first-time buyers were the main driver of the housing
market, but their presence is on the decline. They accounted for 43
percent of purchases in December, down from about half in November, the
Realtors group said.
The inventory of unsold homes on the market fell about 7 percent to 3.3
million. That's a 7.2 month supply at the current sales pace, close to
a healthy level of about 6 months.
Total sales for 2009 closed out the year at 5.16 million, up about 5
percent from a year earlier. That was the first annual sales gain since
2005. But prices fell dramatically last year, declining 12.4 percent to
a median of $173,500, the largest decline since the Great Depression.
Though the results missed Wall Street's expectations, the Realtors'
group says there are signs the market is finally stabilizing.
"There is some sustainable momentum building in the housing market
right now," said Lawrence Yun, the group's chief economist. However, he
cautioned that the recovery will depend on whether the economy starts
adding jobs in the second half of the year.
Many experts project home prices, which started to rise last summer,
will fall again over the winter. That's because foreclosures make up a
larger proportion of sales during the winter months, when fewer sellers
choose to put their homes on the market.
Despite fears that home prices are starting to fall again, some
analysts still believe the worst is over.
"We do not believe it is fair to consider this a double dip in the
housing market," Michelle Meyer, an economist with Barclays Capital,
wrote last week. "The recovery is still under way, but hitting some
bumps in the road."
(This version CORRECTS pct decline in graf 11.) Pending
home sales tumble 16 percent
in November
YAHOO
January 5, 2010
WASHINGTON (Reuters) – Pending sales of previously owned U.S.
homes fell more than expected in November because of the end of a rush
to beat the initial expiration of a popular tax credit, a survey showed
on Tuesday.
The National Association of Realtors said its Pending Home Sales Index,
based on contracts signed in November, dropped 16 percent to 96.0,
after rising for nine straight months.
Analysts polled by Reuters had forecast pending home sales, which lead
existing home sales by one to two months, falling 2 percent in November
after rising to 114.3 in October.
Despite the monthly drop, the pending Homes Sales Index was 15.5
percent higher compared to November 2008, the Realtors group said.
Home sales have been boosted by a $8,000 tax credit for first-time home
buyers, which has been expanded and extended to mid-2010. The popular
tax credit had been scheduled to expire at the end of November.
"The fact that pending home sales are comfortably above year-ago levels
shows the market has gained sufficient momentum on its own," said
Lawrence Yun, NAR chief economist.
"We expect another surge in the spring as more home buyers take
advantage of affordable housing conditions before the tax credit
expires."
The pending home sales index in the Northeast dropped 25.7 percent to
74.4 in November, but was 14.7 percent above a year ago. In the Midwest
the index fell 25.7 percent to 82.0 and was 9.2 percent higher than
November 2008.
Pending home sales activity in the South fell 15.0 percent to an index
of 97.8, but was 14.7 percent higher than a year ago. Contract activity
in the West declined 2.7 percent to 124.6, but was 21.4 percent above
November 2008.
U.S.
home prices up for 5th month, 2nd
straight quarter
YAHOO
By Lynn Adler Lynn Adler
Nov. 24, 2009
NEW YORK (Reuters) – U.S. home prices rose for the fifth
straight month and posted the second quarterly increase, but the pace
of appreciation in September slowed and was less than expected,
according to Standard & Poor's/Case-Shiller indexes on Tuesday.
"We have seen broad improvement in home prices for most of the past six
months," David M. Blitzer, chairman of the Index Committee at S&P,
said in a statement. "However, the gains in the most recent month are
more modest than during the seasonally strong summer months.
The S&P composite index of home prices in 20 metropolitan areas
rose 0.3 percent in September from August after a 1.2 percent rise the
prior month, below the 0.8 percent rise forecast in a Reuters poll.
The 20-city index had an annual decline of 9.4 percent.
The national index for the third quarter increased 3.1 percent from the
prior quarter, the same as in the second quarter, resulting in an 8.9
percent annual drop. That was a significant improvement from the 14.7
percent annual downturn reported in the prior quarter and 19 percent
slump in the first quarter.
The 10-city composite index rose 0.4 percent in September after a 1.3
percent August gain. The annual drop was 8.5 percent.
"We are going into the holiday season, and consumers are not losing
value on their homes," said Craig Thomas, senior economist at PNC
Financial Services in Pittsburgh. "Last Christmas, they were losing
equity value on their homes at a 20 percent clip."
Both the 10-city and 20-city indexes emerged from double-digit annual
declines for the first time in 21 months, S&P said.
The November extension of the $8,000 first-time homebuyer tax credit,
and the addition of a $6,500 credit for move-up buyers, should support
home sales and prices in coming months, economists said.
So should mortgage rates that hover near record lows. Average 30-year
home loan rates are close to 4-7/8 percent, according to Freddie Mac
(FRE.N).
"This is another indication that the housing market is not taking away
from the aggregate economy, and housing is what led us into this
(recession) in the first place," Thomas said after the latest home
price gains.
Average home prices have returned to levels last seen in autumn 2003 as
they gain traction after a three-year rout.
Fewer cities had monthly price improvements in September than in August.
San Francisco and Washington, DC, reported the six straight month of
positive returns. Chicago, Minneapolis, San Diego each had their fifth
straight month of price increases. Nine metro areas in total had
positive monthly returns in September.
Las Vegas remained the most depressed market, S&P said. Prices
there have fallen for 37 straight months, slumping 55.4 percent from
the peak.
The home price trend overall "does suggest that maybe we're seeing a
turn in the housing market and that we're cleaning up some inventory,"
said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St.
Louis.
"This part of the economy is particularly weak, and we're seeing more
consistent signs of recovery," he added. "But high unemployment and
foreclosures are still problems for the housing market. So we're not
completely out of the woods."
We are less
hopeful - looks as if "distressed" sales hide the real transaction
level... Pace Of U.S.
Existing
Home Sales Fastest In 2 Years
NYTIMES
By REUTERS
Filed at 1:51 p.m. ET
August 21, 2009
WASHINGTON (Reuters) - Sales of previously owned U.S. homes jumped 7.2
percent in July to mark the fastest pace in nearly two years, a survey
showed on Friday, in a strong sign that housing is pulling out of a
three-year slump.
Sales in July rose for the fourth straight month to hit an annual rate
of 5.24 million units, the highest since August 2007, the National
Association of Realtors said. The total beat market expectations of a 5
million unit pace and June's 4.89 million pace.
July's increase was the largest monthly gain since the series started
in 1999. The last time sales rose for four consecutive months was in
June 2004, the NAR said.
The Realtors group heralded the July sales as a turning point, while
other observers offered a more cautious view.
"The housing market has decisively turned for the better. We are
bouncing back. A combination of first-time buyers taking advantage of
the housing stimulus tax credit and greatly improved affordability
conditions are contributing to higher sales," NAR Chief Economist
Lawrence Yun said. With
distressed sales accounting for 31 percent of the transactions in July,
inventories rising and home prices remaining depressed, analysts said
the housing market was not out of the woods yet.
The national median home price was $178,400 in July, down 15.1 percent
from the same period last year, weighed down by distressed sales --
sales in foreclosure or close to it -- as such homes typically sell for
15 to 20 percent less than traditional homes.
"It's really going to take home prices to broadly stabilize and come
back a bit before you want to characterize the housing market as being
fully recovering," said Craig Thomas, a senior economist at PNC
Financial Services Group in Pittsburgh.
"I will say there is not an indicator out there that doesn't suggest we
are not moving in that direction."
White House spokesman Robert Gibbs said the housing market appeared to
be bottoming out.
U.S. STOCKS RALLY
U.S. stocks rallied to new 2009 highs on the robust report, with shares
of home builders posting hefty gains. D.R. Horton Inc gained 3.6
percent, while luxury home builder Toll Brothers Inc was up 3.7
percent. A broader measure of home construction stocks was up 3.65
percent.
Treasury debt prices fell as investors viewed the data as another
indication that the recession that started in 2007 was close to an end,
if not over.
U.S. Federal Reserve Chairman Ben Bernanke, speaking at a gathering of
central bankers and top economists in Jackson Hole, Wyoming, said
economic activity appeared to be leveling off, both in the United
States and abroad, and prospects for a return to growth looked good in
the near term.
The housing market is at the epicenter of the worst U.S. recession in
70 years. A recovery in the housing market would help to draw a line
under losses at financial institutions, which have been battered by
defaults on mortgages.
It would also improve the psychology of households, whose net worth has
been decimated by the plunge in home values, and encourage them to
spend rather than save to make up for lost wealth, analysts say.
Even more encouraging, existing homes sales in July were 5 percent
higher compared with the same period last year, the biggest
year-on-year gain since November 2005.
The improvement in July sales was broad-based, with sales of
single-family homes, the worst-hit segment of the market, up 6.5
percent to an annual rate of 4.61 million units and multi-family
dwellings up 12.5 percent to a 630,000 unit rate. Sales were up in
three of the four regions.
Still, high unemployment threatens the budding recovery as many
homeowners continue to lose their properties, and some economists
question the sustainability of the economic recovery many see taking
root.
A report from the Mortgage Bankers Association on Thursday showed late
home loan payments jumped to a record high in the second quarter, with
almost one in eight homeowners delinquent or in the process of
foreclosure.
The inventory of existing homes for sale in July rose 7.3 percent to
4.09 million units from the previous month, NAR said. At July's sales
pace, that represented a 9.4 months' supply, the same as in June.
"The inventory overhang needs to be reduced significantly further
before prices can start rising on a sustained basis. Overall, these
figures may suggest that the recovery in housing activity is gathering
pace, but there is a long way to go yet," said Paul Dales, U.S.
economist at Capital Economics in Toronto.
Pace of home
price declines slows in April
YAHOO!
June 30, 2009
NEW YORK (Reuters) – Prices of U.S. single-family homes declined in
April from the prior month, but the pace moderated, suggesting
stability is emerging in some regions, according to Standard &
Poor's/Case Shiller home price indexes reported on Tuesday.
The index of 20 metropolitan areas dipped 0.6 percent in April from
March, after a 2.2 percent decline the month before, for an 18.1
percent downturn from a year earlier.
S&P said its index of 10 metropolitan areas declined 0.6 percent in
April for an 18 percent year-over-year drop, after falling 2.1 percent
month on month in March.
The rate of annual decline in these measures has improved, from 18.7
percent for both indexes in March.
"While one month's data cannot determine if a turnaround has begun, it
seems that some stabilization may be appearing in some of the regions,"
David M. Blitzer, chairman of the index committee at S&P, said in a
statement. "We are entering the seasonally strong period in the housing
market, so it will take some time to determine if a recovery is really
here."
Blitzer said that the stock market has risen from March and consumer
confidence gauges have turned higher, fostering improved sentiment in
housing.
WASHINGTON (Reuters) - Pending sales of existing homes plunged to a
seven-year low in November, data showed on Tuesday, as mounting job
losses and a deepening economic recession kept potential house buyers
on the sidelines.
The National Association of Realtors Pending Home Sales Index, based on
contracts signed in November, dropped 4 percent to 82.3, the lowest
level since the series started in 2001. The reading was 5.3 percent
lower than November 2007's print of 86.9.
Economists polled by Reuters ahead of the report had forecast pending
home sales dropping by 1 percent. October's pending home sales were
revised down to 85.7. And an idea how to fix the housing mess!
The Reckoning: Tax Break May Have Helped Cause Housing Bubble
NYTIMES
By VIKAS BAJAJ and DAVID LEONHARDT
December 19, 2008
“Tonight, I propose a new tax cut for homeownership that says to every
middle-income working family in this country, if you sell your home,
you will not have to pay a capital gains tax on it ever — not ever.”
— President Bill Clinton, at the 1996 Democratic National Convention
Ryan J. Wampler had never made much money selling his own homes.
Starting in 1999, however, he began to do very well. Three times in
eight years, Mr. Wampler — himself a home builder and developer — sold
his home in the Phoenix area, always for a nice profit. With prices in
Phoenix soaring, he made almost $700,000 on the three sales. And
thanks to a tax break proposed by President Bill Clinton and approved
by Congress in 1997, he did not have to pay tax on most of that profit.
It was a break that had not been available to generations of Americans
before him. The benefits also did not apply to other investments, be
they stocks, bonds or stakes in a small business. Those gains were all
taxed at rates of up to 20 percent.
The different tax treatments gave people a new incentive to plow ever
more money into real estate, and they did so. “When you give that big
an incentive for people to buy and sell homes,” said Mr. Wampler, 44, a
mild-mannered native of Phoenix who has two children, “they are going
to buy and sell homes.”
By itself, the change in the tax law did not cause the housing bubble,
economists say. Several other factors — a relaxation of lending
standards, a failure by regulators to intervene, a sharp decline in
interest rates and a collective belief that house prices could never
fall — probably played larger roles. But many economists say that
the law had a noticeable impact, allowing home sales to become tax-free
windfalls. A recent study of the provision by an economist at the
Federal Reserve suggests that the number of homes sold was almost 17
percent higher over the last decade than it would have been without the
law.
Vernon L. Smith, a Nobel laureate and economics professor at George
Mason University, has said the tax law change was responsible for
“fueling the mother of all housing bubbles.”
By favoring real estate, the tax code pushed many Americans to begin
thinking of their houses more as an investment than as a place to live.
It helped change the national conversation about housing. Not only did
real estate look like a can’t-miss investment for much of the last
decade, it was also a tax-free one. Together with the other
housing subsidies that had already been in the tax code — the
mortgage-interest deduction chief among them — the law gave people a
motive to buy more and more real estate. Lax lending standards and low
interest rates then gave people the means to do so.
Referring to the special treatment for capital gains on homes, Charles
O. Rossotti, the Internal Revenue Service commissioner from 1997 to
2002, said: “Why insist in effect that they put it in housing to get
that benefit? Why not let them invest in other things that might be
more productive, like stocks and bonds?”
The provision — part of a sprawling bill called the Taxpayer Relief Act
of 1997 — exempted most home sales from capital-gains taxes. The first
$500,000 in gains from any home sale was exempt from taxes for a
married couple, as long as they had lived in the home for at least two
of the previous five years. (For singles, the first $250,000 was
exempt.)
Mr. Wampler said he never sold a home simply because of the law’s
existence, but it played a role in his decisions and also became part
of his stock pitch to potential customers who were considering buying
the homes he was building in the desert. He would point out that the
tax benefits would increase their returns on a house, relative to
stocks.
“Why not put your money on the highest-yielding investment with the
highest tax benefit?” he said recently.
During the boom years, he prospered. But today he owns 80 acres of land
on the outskirts of Phoenix that he cannot sell. He owes $8 million to
his banks, which may soon foreclose on his land.
“I am literally dying on the vine,” he said.
The change in the tax law had its roots in a Chicago speech that
Senator Bob Dole, Mr. Clinton’s Republican opponent in the 1996
presidential election, gave on Aug. 5 of that year. Trailing Mr.
Clinton in the polls, Mr. Dole came out for an enormous tax cut,
including an across-the-board reduction in the capital-gains tax.
The proposal made Mr. Clinton’s political advisers more nervous than
almost anything else during the campaign. The campaign’s chief
spokesman, Joe Lockhart, traveled to Chicago to stand outside the
ballroom where Mr. Dole was speaking and make the case that the Dole
tax cut would cause the deficit to soar.
At the same time, Mr. Clinton’s aides began scrambling to come up with
their own tax proposal. Dick Morris, the president’s chief outside
political adviser, argued that Mr. Clinton could assure his re-election
by matching Mr. Dole’s call for a big cut in the capital-gains tax.
But members of Mr. Clinton’s economic team, led by Treasury Secretary
Robert E. Rubin, disliked that idea. They thought it would undo the
tough work the administration had done to reduce the budget deficit. So
they instead went looking for smaller tax cuts that would allow their
boss to campaign as both a fiscal conservative and a tax cutter.
Getting rid of capital gains on most home sales seemed like the perfect
idea.
Treasury officials had become interested in that provision earlier in
Mr. Clinton’s term after Jane G. Gravelle, an economist at the
Congressional Research Service, had called it to their attention,
according to Eric J. Toder, an official in the tax policy office at the
time. He and his colleagues were looking for ways to simplify the tax
code, and Ms. Gravelle told them that eliminating capital-gains taxes
on houses was an excellent candidate.
The tax forced homeowners to keep track of all their renovations over
many years, because the cost of those renovations could be subtracted
from their taxable gain. Even renovations on previous homes often
qualified, as long as people had deferred the tax in the past by buying
a new house at least as valuable as their old one.
“It was very hard for people to keep track of that information,” said
Leslie B. Samuels, the assistant Treasury secretary for tax policy from
1993 to 1996.
People could also avoid the tax under a one-time exemption, for profits
of up to $125,000, if they were older than 55. Thus, the tax raised
relatively little revenue — perhaps just a few hundred million dollars
in today’s terms. “It was the worst kind of tax system,” Ms. Gravelle
said recently. “It raised very little revenue, but it caused all these
distortions and compliance problems.”
Three weeks after Mr. Dole’s speech, with support from top Treasury
officials, the proposal made it into Mr. Clinton’s speech at the
Democratic convention. During the presidential debates that followed,
he used it to parry Mr. Dole’s calls for a big tax cut. The following
summer, Mr. Clinton signed the provision into law.
At the time, Realtors and home builders lobbied for the provision and
there was only scant opposition. Grover Norquist — a conservative
activist and adviser to Newt Gingrich — said home sales did not deserve
special treatment. But Republicans ended up voting for the bill by even
wider margins than Democrats.
Today, it is the subject for considerably more debate. Ms. Gravelle and
Mr. Samuels said they thought the law had done more good than ill. And
William G. Gale, director of economic studies at the Brookings
Institution, said he did not think that the change in the law was
central to the bubble. Low interest rates, he said, were far more
important.
The law’s defenders say that it also removed at least one tax incentive
that had pushed homeowners to trade up. Before 1997, people had to buy
a house that was at least as valuable as their previous one to avoid
the tax, or else take the one-time exemption. Now they could buy a
smaller property or move into a rental.
But many economists say the net effect of the law was clearly to
inflate the real estate market. Dean Baker, co-director of the Center
for Economic and Policy Research, a liberal policy group in Washington,
criticized the exemption as “a backward policy” that “helped push more
money into housing.”
A spokesman for Mr. Clinton declined to comment for this article.
Perhaps the most detailed analysis of the provision has been the study
by a Federal Reserve economist, Hui Shan, who did the analysis while at
M.I.T. Ms. Shan looked at homeowners with significant equity gains,
before and after 1997, and compared the likelihood of their selling
their house. Her study covered 16 towns around Boston and took into
account a host of other factors, like the general rise in home prices
at the time.
Among homes that had appreciated less than $500,000, she concluded that
the change caused a 17 percent increase in sales in the decade after
1997. Before the law changed, many people apparently avoided paying the
tax by simply staying in their homes.
Ms. Shan also found that sales actually declined among homes with more
than $500,000 of gains after the law passed. (Under the new law,
couples have to pay taxes on gains above $500,000, even if they roll
all those gains into a new house.) Nationwide, however, less than 5
percent of home sales over the last decade had gains of more than
$500,000, according to Moody’s Economy.com.
Despite the criticism, there has been little political support for
trimming the tax breaks for housing. In 2005, a bipartisan panel of tax
experts, which was appointed by President Bush and included Mr.
Rossotti, concluded, “The tax preferences that favor housing exceed
what is necessary to encourage homeownership.” Among other things, it
recommended increasing to three years the amount of time people had to
stay in homes to claim the tax break on a sale. But Mr. Bush and other
policy makers largely ignored the panel’s report.
Geo Hartley, a lawyer who has lived in Los Angeles and Washington over
the last two decades, captures the divergent effects that the law
appears to have. Mr. Hartley, who is 59 and single, said he found the
old law “weird,” because it led him to buy bigger houses than he wanted.
Since the law changed, Mr. Hartley has bought smaller homes. But he has
also moved more frequently, knowing that most of the gains on his
houses would not be taxed. He lived in one house in Los Angeles for a
full decade before 2000. Since then, he has moved three times, making a
handsome — and mostly tax-free — profit each time.
“It’s part of the thinking that gets you more motivated to buy and sell
property,” said Mr. Hartley, who now lives in a town house in
Washington that he is trying to sell, “and have the American dream of
owning a home.”
Homeowners Who Modified
Loans Are in Trouble Again NYTIMES
By THE ASSOCIATED PRESS
Filed at 12:40 p.m. ET
December 8, 2008
WASHINGTON (AP) -- More than half of all homeowners who had their loans
modified to make the payments more affordable in the first half of the
year are already in default again, banking regulators said
Monday. The new data raise questions about whether government
money may be better spent on creating jobs, rather than averting
foreclosures, said John Reich, director of the federal Office of Thrift
Supervision office at a housing industry forum sponsored by his agency.
''I do have concerns about allocating federal resources'' Reich said.
However, many experts claim the bulk of loan modifications don't
actually provide much financial relief for borrowers. The
government's data don't include enough detail about the types of the
loan modifications that were made, said Sheila Bair, chairman of the
Federal Deposit Insurance Corp. ''The quality of the (modifications)
are not what they should be,'' she said.
The U.S. economic picture has darkened over the past month. One in 10
Americans with a mortgage is either behind or in foreclosure, and more
than 500,000 jobs were lost in November. Unemployment stands at
6.7 percent, and the worldwide credit markets have only improved
modestly from the freeze that led Congress to approve a $700 billion
bailout before the election.
Discussion on Monday's focused on how broad the government's
intervention should be, rather than whether the government should play
any role at all. The U.S. is on track for 2.25 million foreclosures
this year.
''We need a bottom-up approach, in my view, by modifying people's
mortgages and helping them stay in their homes,'' said New Jersey Gov.
Jon Corzine.
Corzine called for a three to six month halt to foreclosures while the
government works out a more aggressive plan.
Mark Zandi, chief economist at Moody's Economy.com, said the public is
likely to be more sympathetic to efforts to assist troubled borrowers,
because the link between the foreclosure crisis and the sinking economy
is increasingly clear in the midst of most Americans.
''It's now in every corner of the country,'' Zandi said. ''I think that
people understand that this is a broader issue.''
During an interview that aired Sunday on NBC's ''Meet the Press,''
President-elect Barack Obama declined to say how large an economic
stimulus plan he envisions. He said his blueprint for recovery will
include help for homeowners facing foreclosure on their mortgages if
President George W. Bush has not already acted when Obama takes office
next month.
For nearly a year, some consumer advocates, lawmakers and think tanks
have advocated a dramatic government response. The effort, they say,
should be similar to created the Home Owners' Loan Corp. in 1933 to
help borrowers refinance troubled home loans during the Great
Depression. The Bush administration has focused mainly on
voluntary industry efforts to modify loans, and those have not stopped
the surge in foreclosures.
Shouldn’t
We Rescue Housing?
NYTIMES
By JOE NOCERA
Published: October 17, 2008
Now that the government has “saved” Wall Street — at least for the
moment — hasn’t the time finally come to save Main Street too?
The Treasury Department just pumped $125 billion into the country’s
largest financial institutions, and it promises to use another $125
billion — more, if necessary — to recapitalize regional and community
banks. They are vital steps. This week, at long last, the credit
markets thawed, at least a little, and the global recapitalization of
the banking system is the reason.
But the job isn’t done yet. The government now needs to tackle what R.
Glenn Hubbard, the former chairman of the Council of Economic Advisers
under President Bush, calls “the elephant in the room”: the continuing
decline of housing prices. That decline means more and more homeowners
are saddled with “impaired mortgages” (to use the current lingo),
meaning their homes are worth less than what they owe on them. They
didn’t necessarily do anything wrong; they just bought a house near the
peak of an unsustainable bubble. Now they have little economic
incentive to keep making mortgage payments.
Of course, millions of additional homeowners did make a big mistake:
they took advantage of “liar loans” and other too-good-to-be-true deals
to buy homes they couldn’t afford. Many are still in those homes,
hanging on for dear life. Many others have already faced foreclosure
proceedings.
I’ve seen estimates suggesting as many as one out of every six
homeowners has a troubled mortgage. This is an enormous social problem.
It is also a continuing economic problem. In the year since the crisis
began, the world’s financial institutions have written down around $500
billion worth of mortgage-backed securities. Unless something is done
to stem the rapid decline of housing values, these institutions are
likely to write down an additional $1 trillion to $1.5 trillion. In
other words, we ain’t seen nothin’ yet.
And please don’t raise the specter of moral hazard, the notion that
people who did dumb things need to take their lumps so they won’t do it
again. First of all, you would have to be an absolute idiot to repeat
the folly of the housing bubble, even if you don’t lose your house in
the crisis. I contend that this financial crisis is going to cause an
entire generation to become debt-averse, as our parents were after the
Depression.
Second, there is the question of justice. For Wall Street, which made
plenty of its own dumb mistakes, moral hazard went out the window the
minute the government realized what a catastrophic error it made when
it allowed Lehman Brothers to go bankrupt. The government is not going
to let another big institution fail. Why should homeowners have to pay
more for their sins than Wall Street is paying for its sins? As anger
across the country rises, this is becoming a political issue as well.
Yes, there were lots of Americans who were not greedy or foolish during
the housing bubble, and many resent the idea that their neighbors might
get a bailout they don’t deserve. They need to get over themselves. If
housing prices keep falling, many millions of additional homeowners
will find themselves, through no fault of their own, with underwater
mortgages. Besides, foreclosures damage property values for everyone,
not just those losing their homes.
Finally, and perhaps most important, the housing bubble and its
aftermath form the core problem from which all other problems flow. If
the government doesn’t do anything about it, the economy will remain in
chaos. Banks will still be afraid to write mortgages because they won’t
trust the value of the collateral. Giant financial institutions will
continue to post multibillion-dollar write-downs. And homeowners will
continue to face the stark reality that their primary asset is in
jeopardy.
And yet, so far the government’s response to this part of the crisis —
the part that most directly affects voters, for crying out loud — has
been anemic. The Hope for Homeowners program, signed into law in July,
is both too complicated and too narrow. The new $700 billion bailout
bill contains some toothless pleas to help homeowners. Efforts to
jawbone the mortgage industry have largely failed.
Just a few days ago, the chairman of the Federal Deposit Insurance
Commission, Sheila Bair, publicly broke with her counterparts at the
Treasury and the Federal Reserve and criticized the Bush administration
for not doing enough for homeowners. “We’re attacking it at the
institution level as opposed to the borrower level, and it’s the
borrowers defaulting,” she told The Wall Street Journal. “That is
what’s causing the distress at the institution level. So why not tackle
the borrower problem?”
Why not, indeed. It turns out there are plenty of plans out there to do
just that. But not one has broken through to gain wide backing.
For instance, both presidential candidates have homeowner assistance
plans, but they are poorly conceived and would cost the government
billions of additional dollars. Mr. Hubbard, now the dean of the
Columbia Business School, and a Columbia colleague, Chris Mayer, say
they believe the answer lies in having “the Bush administration and
Congress allow all residential mortgages on primary residences to be
refinanced into 30-year fixed-rate mortgages at 5.25 percent (matching
the lowest mortgage rate in the last 30 years), and place those
mortgages with Fannie Mae and Freddie Mac,” as they wrote recently.
A Yale economist named John D. Geanakoplos suggests a new system
to “modify mortgage loans to keep homeowners in their homes,” as he put
it in a recent paper. He also says the government should give financial
incentives to renters to buy homes — and thus create a floor for
housing prices. Both of these ideas are far better than the proposals
of the two candidates. But recently a proposal came across my
desk that I believe is so smart,
and so sensible, that I hope our nation’s policy makers will give it a
serious look. It comes from Daniel Alpert, a founding partner of
Westwood Capital, a small investment bank. I have quoted Mr. Alpert
frequently in recent columns, because he has been both thoughtful and
prescient on the subject of the financial crisis.
Here’s his idea: Pass a law that
encourages homeowners with impaired
mortgages to forfeit the deed to their lenders but allows them to stay
in the homes for five years, paying prevailing market rent. Under the
law Mr. Alpert envisions, the lender would be forced to accept the
deed, and the rent. After five years, the homeowner-turned-renter would
have the right to buy the home back, at fair market value, from the
lender.
There are so many things I like about
this idea that I hardly know
where to begin. Let’s start with the fact that it doesn’t require a
large infusion of taxpayers’ money. Indeed, it doesn’t require any
government money at all. It also doesn’t let either homeowners or
lenders off the hook, as many other plans would. The homeowner loses
the deed to his home, which will be painful. The lending institution,
in accepting prevailing market rent, will get maybe 60 or 70 percent of
what it would have gotten from a healthy mortgage-payer. (Rents are
considerably lower than mortgage payments right now.) That will be
painful too. Moral hazard will not be an issue.
As Mr. Alpert told me the other day,
his proposal “admits the truth:
the homeowner doesn’t have equity, and the lender has taken a loss.
They should exchange interest, but not in a way that throws the
homeowner out in the street.”
Which is the other key part of his
plan. It has the best chance of
preventing, as he puts it, “the massive disruption of the economy and
the social dislocation” that will come from large numbers of
foreclosures. And it is the continuing foreclosures that are likely to
cause housing prices to fall so hard that they will drop below the real
value of the shelter.
That, of course, is exactly what
happened during the bubble, albeit in
reverse — prices wildly overshot the true value of the home — and it
has to be prevented on the way down. Otherwise we face further economic
calamity.
Why did Mr. Alpert choose five years?
Two reasons. First, he feels
confident that housing prices will have stabilized by then. “We
continue to have a growing population,” he said. “And there is zero
chance there will be a material increase in housing stock over the next
five years that will exceed demand. Those two factors alone will cause
housing to stabilize.”
Second, he says five years will give
the renters enough time to get
their financial affairs in order — to pay down their various debts and
save enough to make the 10 percent down payment an F.H.A. loan
requires. (Many of the homeowners affected by this plan would be
eligible for F.H.A. loans, Mr. Alpert believes.)
If they don’t have enough for a down
payment, they would have to leave,
of course, but it would be far less disruptive to the economy than it
would be right now, in the middle of the crisis.
Does the plan have stumbling blocks?
Sure it does. One obvious one is
that ideologues will view its being mandatory as an improper “taking”
of homeowners’ property rights and a violation of the mortgage
contract. But, as Mr. Alpert puts it, “the homes involved are
economically without value to the existing homeowners.” He adds, “What
the plan buys is time to heal for both sides in a fairly equitable and
controlled manner.”
Mr. Alpert calls his plan “The Freedom
Recovery Plan.” On my blog
(www.nytimes.com/executivesuite), I have linked to Mr. Alpert’s
detailed description of how it would work, which runs eight pages. I
have also posted a series of short “comments” that he sent me recently,
which outline the severity of the problem. I encourage you to read both
documents, and weigh in on the plan’s merits.
That goes for you, too, government
policy makers. I acknowledge that
this may not be the perfect solution. It may have some fatal flaw that
neither Mr. Alpert nor I can see. But if you don’t like this idea, it
is incumbent upon you to come up with something better.
Actually, it’s long overdue.
A leading
indicator for new construction - to the lagging indicator housing
industry?
Construction Spending Falls More Than Expected
NYTIMES
By THE ASSOCIATED PRESS
Filed at 10:04 a.m. ET
July 1, 2009
WASHINGTON (AP) -- Construction spending fell more than expected in
May, a sign the problems facing the nation's builders are far from over.
The Commerce Department says construction spending dropped 0.9 percent
in May, nearly double the 0.5 percent drop that economists expected.
Adding to the signs of weakness, activity in the past two months was
revised lower.
Construction rose 0.6 percent in April, lower than the 0.8 percent
originally reported. A March increase of 0.4 percent was replaced with
a decline of the same amount. That left the April gain as the only
increase in the past eight months. CHFA Head Says Junk Mortgages'
Effects Persist DAY
By Anthony Cronin
Published on 6/30/2009
A housing official said Monday that effects of the subprime mortgage
mess are still reverberating throughout the state's economy, but he
held out hope that revved-up state and federal programs will be able to
revive Connecticut's housing market.
Timothy Bannon, president and chief executive officer of the
Connecticut Housing Finance Authority (www.chfa.org) in Rocky Hill,
told a housing symposium sponsored by Liberty Bank that “we know how
the mess that we're in today began.”
Subprime lenders began to flood the housing market in late 2004, said
Bannon, “offering loans that seemed too good to be true - and that's
exactly what they turned out to be.”
Bannon said the “house of cards” subprime lenders created has been
falling ever since. “They took advantage of the dream of homeownership
and turned it into a nightmare of financial destruction and family
destitution,” he told those attending the symposium at The Water's Edge
resort in Westbrook.
He said subprime lenders concentrated their loans in lower-income
neighborhoods with lower education levels. “The subprime lenders ...
purposely took advantage of people who had too little education, too
little experience and too much hope. They stole their money and they
dashed their dreams,” Bannon said.
The housing official told those attending the bank forum - from
affordable housing experts to bankers and municipal officials -that the
impact of unscrupulous subprime lenders were not problems of their
making, but they have impacted the banking, lending and municipal
arenas.
The Rocky Hill-based CHFA works with lower income or disadvantaged
borrowers, and its typical borrower makes less than $65,000 annually.
Almost 40 percent of its borrowers are female heads of households. “But
we make - you make and we buy - good loans,” he said of his agency.
Bannon congratulated Liberty Bank's financial performance this past
year as well as its stellar lending reputation. “Liberty Bank is a
Connecticut success story,” he added. Between 1992 and 2008, Liberty
has originated nearly 600 CHFA loans totaling nearly $67 million. This
past year, the Middletown-based mutual savings bank - the state's
oldest - was among the housing agency's top 20 loan originators.
Bannon said several new federal housing initiatives, as well as new
programs from Fannie Mae, the giant mortgage lender, are helping to
restore some stability in the state's, and nation's, wobbly housing
market.
He said his agency is working through numerous initiatives, including
the CT Families mortgage-loan refinancing program, to help borrowers
delinquent on their adjustable rate mortgages, along with the Emergency
Mortgage Assistance Program that provides financial assistance to help
homeowners meet their monthly housing expenses.
Bannon also said free mortgage counseling provided by CHFA and a
judicial mediation program are helping homeowners. He said these
programs have made possible nearly 19,000 repayment and loan
modifications to help homeowners avoid foreclosure.
HOUSING PERMITS-CT Housing
permits plummet in state; Builders in 'survival mode' after
Connecticut records 43.5 % drop over 12-month period
DAY
Article published Oct 28, 2009
People in the local building industry say they've never seen business
conditions as difficult as they are today, and statewide new
housing-permit figures released Tuesday seem to bear out their
concerns. New housing permits in Connecticut were down 43.5
percent in
September compared with a year ago, according to figures released by
the state Department of Economic and Community Development. Permit
activity is off nearly 40 percent so far this year compared with the
same period last year - and 2008 wasn't a great year, either.
"I've been in this business over 50 years and I've never seen it this
bad," said Tom Lenihan, owner of Lenihan Lumber in Waterford. "It's
worse than it was (during the last real estate recession) in the late
'80s and early '90s."
The 218 housing permits issued in the state last month represented less
than a quarter of the number approved for the same period four years
ago.
"We're all in survival mode," said Norton C. Wheeler III, owner of the
Mystic River Building Co.
Lenihan said the problem today is that people cannot get loans or
mortgages.
"Money is not available; the banks are very cautious," he said. "That
was not the case in '88, '89 and '90."
"People are scared, and the banks are being totally careful," said
Renee Main, executive officer of the Builders Association of Eastern
Connecticut. "It's just the opposite of what was going on" during the
real estate boom three to five years ago.
Jim Cronin, president of Dime Bank in Norwich, agreed that local
financial institutions have more stringent loan requirements than they
did before the financial crisis hit last year. But he has seen few loan
requests from individuals or developers, and those his bank does
receive can be difficult to consummate because of low appraisals based
on a falling real-estate market and the paucity of comparable
properties on which to base valuations.
"Sales are down and values are down. It's a Catch-22," he said.
Adding to the pain, said Wheeler, a former president of the local
builders association, is that banks are now requiring developers to put
up about half of the cost of a project, using their own funds or
private equity. This compares with banks' willingness to fund 80 or 90
percent of development projects before last year's financial panic.
"They want you to have some skin in the game," Wheeler said. "We're
working on a smaller margin this year than last year."
Cash flow has become a problem for some builders, said Main, who noted
that several longtime members have dropped out of the association
because they can't afford the annual dues.
"These are members that made it through the '90s," said Main. "They've
been members for 25 or 30 years."
Main said the problem is affecting just about everyone associated with
building, including home renovators, lumberyards and even
equipment-rental businesses. While the cost of labor has come
down,
other fixed costs such as medical insurance and liability insurance
continue to rise, according to industry insiders. Strangely,
the cost
of land hasn't come down as quickly as real-estate prices, builders
said, making it more difficult for new home construction to compete on
cost with already built residences.
"The spec market is certainly nonexistent," Wheeler said. "Things are
pretty slow right now."
As an indication of the slowdown, Michael Mastronunzio, owner of Brom
Builders in Norwich, said he had 17 houses under construction at one
point in 2005; this year, he has only about half a dozen - and he
considers himself lucky. But Mastronunzio and others are starting
to
feel like the worst may be behind them. Brom Builders just took out a
permit last month for a 22-unit affordable-housing project in Norwich
called Summit Woods Apartments 2, and it is planning a few individual
houses in Groton and North Stonington.
"We're feeling a lot better than six months ago," he said.
"There's decent demand for custom homes," said Wheeler. "In the last
two months we've seen an uptick in inquiries on new homes. People
sitting on the fence for a couple of years are starting to get antsy."
But many fence-sitters may stay there if worries over job losses
persist, insiders said.
"People are just being very cautious on an individual basis," said
Cronin of Dime Bank.
Building-industry officials say a key to breaking the slow building
cycle will be to get real estate sales moving again. They praise the
$8,000 first-time homebuyer tax credit, which has provided a life
jacket for the lower end of the market, but said it will take a while
before it affects to new construction.
"The key is the economy," Wheeler said. "People need confidence that
there's some stability. State's
housing permits plunge 47% for year DAY
By Anthony Cronin
Published on 6/26/2009
The state's new-home construction activity remained lackluster in May,
with the number of building permits falling more than 60 percent from a
year earlier.
Through the first five months of this year, Connecticut saw permit
activity for new-home construction decline about 47 percent.
Figures provided by the Connecticut Department of Economic and
Community Development show the state's various cities and towns issued
just 192 permits for new construction this past month. A year earlier,
that figure stood at 493.
Through the first five months of this year, 1,031 permits for new
housing units have been issued across the state - down from 1,947
permits issued in last year's comparable period.
The state's economic-development agency compiles monthly permit figures
for all of Connecticut's 169 municipalities.
May's steep dropoff in new-home activity follows three consecutive
months of modest increases. In February, 200 permits were issued
compared to 92 in January, followed by 208 in March and 339 in April.
In southeastern Connecticut, permit activity mirrored the statewide
performance, with permits falling in nearly every town and city through
the first five months of this year. In East Lyme, for instance, only
five permits were issued through May, compared to 13 a year earlier.
New London issued 9 permits compared to 15 a year earlier, while
Groton's permit activity fell to 9, compared to 28
a year earlier.
New-home construction continues to be hampered by this prolonged
recession, which has seen a tightening of the credit spigot. Credit is
a key ingredient in the home-building and lending industries. Despite
the downturn, mortgage rates for 30-year loans continue to hover above
5 percent, still at historic lows but showing an upward creep from a
few months back.
On Thursday, BankRate.com reported average 30-year mortgage rates of
nearly 5.6 percent. Last week, they were around 5.4 percent, according
to the mortgage-tracking firm.
U.S. Homes Recovery Distressingly Slow: Reuters / UMich NYTIMES
By REUTERS
Filed at 10:11 a.m. ET
June 19, 2009
NEW YORK (Reuters) - A "distressingly slow" U.S. housing recovery, with
inflation-adjusted home values expected to decline over the next five
years, makes it unlikely that housing wealth will drive consumer
spending in the next decade, a Reuters/University of Michigan survey
found.
Consumers are apt to maintain their renewed emphasis on savings and
paring debt, Richard Curtin, director of the survey, said in a June
home price update on Friday. Housing wealth changes have a lagged
impact on spending, and the influence of declines seen in 2008 will
depress growth in consumer spending in 2009 and 2010, the survey said.
"To be sure, refinancing has reduced the burden of mortgage payments,
giving consumers more discretionary income, but the refinancing impact
on spending will fade as mortgage rates increase," Curtin said.
"Moreover, conventional refinancing is largely limited to consumers
whose home is worth about 20 percent more than their current
outstanding mortgage."
The pool of those homeowners is fast shrinking with each month that
home prices sink. On average, home prices nationally have slumped by
more than 32 percent from mid-2006 highs, based on Standard &
Poor's/Case-Shiller indexes. Sixty percent of homeowners reported
home price declines in the second quarter Reuters/University of
Michigan surveys. The share of those reporting losses was greatest in
the West, at 77 percent, and least in the South, at 51 percent.
Some signs of sentiment improvement emerged in the second quarter. Just
22 percent of those surveyed expected price declines in the year ahead,
the lowest share since 2007. The share of homeowners reporting
price declines in the past year and expected further erosion in the
year ahead fell to 28 percent in the second quarter from 35 percent in
the first quarter and 43 percent a year ago.
"Declines in prices have prompted consumers to view home buying
conditions much more favorably, but those same price declines have
prompted the least favorable assessments of home selling conditions
ever recorded," Curtin said.
Most home buyers are also sellers. As a result, many potential
transactions are thwarted because the reluctance to sell at a "loss" is
seen as greater than the advantage of the buying at a reduced price, he
said. HOUSING
PERMITS-USA
Post tax-credit incentive, permits down.
Analysis: U.S. rental demand lifts housing sector
YAHOO
By Margaret Chadbourn
27 Dec. 2011
(Reuters) - Brian Keith is busier than ever as the architecture firm he
works for rushes to wrap up work on a 300-unit apartment complex in
Dallas. The project is one of dozens the firm, JHP Architecture,
has on its hands -- a surge of business driven by a rise in demand in
the United States for rental properties. The increased demand has
forced JHP to expand, and it expects to keep hiring at least through
the first quarter.
"We're seeing overall work come back and there's a backlog of contracts
to go through," said Keith, director of urban design and planning at
JHP. "There's strong interest in multi-family units and plenty of
pent-up demand."
With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising
and property prices under pressure, more and more Americans have given
up the dream of owning, opting instead to rent, a shift that is
remaking the face of the U.S. housing industry. The percentage of
Americans who own their home dropped from a peak of 69.2 percent in
late 2004 to a 13-year low of 65.9 percent in the second quarter. It
edged up to 66.3 percent in the third quarter of this year.
On the flip side, the percentage of rental properties that are empty
fell to 9.8 percent in the third quarter from 10.3 percent a year
earlier. In a recent report, Oliver Chang, an analyst at Morgan
Stanley, dubbed 2012 "The Year of the Landlord."
"Rents are rising, vacancies are falling, household formations are
growing and rental supply is limited," the Morgan Stanley report
stated. "We believe the demand for rental properties will continue to
grow."
Groundbreaking for new housing jumped 9.3 percent in November to the
highest level in 19 months, fueling optimism that the battered housing
market was regaining its footing. The gains, however, were almost
solely in multifamily housing. Groundbreaking for structures with five
or more units shot up more than 30 percent from October to now stand at
nearly double the year-ago level. Prices reflect the shift in
demand. Rental costs are up 2.4 percent over the last year, compared
with an increase of just 0.6 percent in 2010.
Steve Blitz, senior economist at ITG Investment Research, says the lure
of higher returns is spurring the development of apartment buildings.
He argued the next "boom" in residential construction has already
started.
"The reason rents were rising is that through the past 15 years there
has been an under-building of rental properties because typical renters
were increasingly able to garner cheap financing to buy a house," he
wrote in a research note.
While the rise in demand is great news for builders and developers, it
remains unclear what the pick-up in homebuilding will mean for the
economy as a whole.
"Residential construction will be a plus to GDP in 2012, but house
price declines will be a negative. So net, net housing will be neutral
or a small drag on the economy," said Mark Zandi, chief economist at
Moody's Analytics.
At its peak at the end of 2005, homebuilding accounted for about 6.2
percent of overall economic activity. Now, it is only about 2.4
percent. U.S. housing starts in April 2009 hit their lowest level
on records dating to January 1959. While multifamily starts have given
them a lift, 2011 may be the weakest year ever for construction of
single-family homes.
"Business is slightly down from last year," said Bill Zach, a
third-generation homebuilder. His family business, the Zach Building
Co. in the Milwaukee, Wisconsin, area, is mainly focused on
single-family units.
To Zach, that his firm is still in business when so many of his
competitors have gone bust represents some success.
"It used to be my competition was every guy that owned a pick-up truck
and called himself a builder. Hundreds of them," Zach said. "That's no
longer the case, those guys are dropping by the wayside."
But there are signs of a turn and signals that the housing market may
be close to finding a bottom. The Architecture Billings Index, a
gauge of future construction, picked up last month, breaking above the
50 level to signal growth in billings. And the stock of
homebuilders, as measured by a Dow Jones index, has shot up more than
30 percent since early October.
"Residential construction is finally beginning to rise from its
post-recession lows," said Joseph Lavorgna, chief U.S. economist for
Deutsche Bank. "The true test for starts and (building) permits, as
well as most of the sales metrics, will come during the spring buying
season."
June
housing starts at 6-month high
YAHOO
Reuters
By Lucia Mutikani
19 July 2011
WASHINGTON (Reuters) - Housing starts scaled a six-month high in June
and permits for future construction unexpectedly increased, a
government report showed on Tuesday, partly reflecting growing demand
for rental apartments.
The Commerce Department said housing starts increased 14.6 percent to a
seasonally adjusted annual rate of 629,000 units, the highest level
since January, as ground breaking for multi-family units soared 30.4
percent. But May's starts were revised down to a 549,000 unit
pace, which was previously reported as a 560,000 unit rate.
Economists polled by Reuters had forecast housing starts rising to a
575,000-unit rate. Compared to June last year, residential construction
was up 16.7 percent. U.S. stock index futures extended gains
after the housing data, while government debt prices extended losses.
The dollar pared losses against the yen. Despite the June
increase, the housing starts rate remains less than a third of the peak
it reached during the housing boom.
"In the grand scheme of things, it's nice to see it jump higher, but it
doesn't take us out of the range we've been in," said David Mann,
senior currency strategist, Standard Chartered in New York. "So there's
still an extremely long way to go before we can be sure there's a
serious recovery underway."
Residential construction accounts for about 2.4 percent of gross
domestic product and indications are that it remained a drag in the
second quarter after shrinking at a 2.0 percent annual rate in the
first three months of 2011. The government will release its first
estimate for second-quarter gross domestic product on July 29.
Growth estimates for the April-June quarter currently range between 1
percent and 2.3 percent. The economy grew at a 1.9 percent pace in the
first three months of the year.
An overhang of previously owned homes on the market has left builders
with little appetite to break ground on new projects and is frustrating
the housing sector's recovery two years after the end of the 2007-09
recession. Previously owned homes are currently selling well
below their cost of construction as a deluge of foreclosed properties
continues to depress prices. Data on Wednesday is expected to
show that existing home sales rose 2.9 percent to a 4.90 million unit
pace in June, according to a Reuters survey, but not enough to whittle
down bloated inventory.
Confronted with plummeting home values, Americans are shunning home
ownership, pushing up demand for rentals. That has resulted in a
rise in groundbreaking for multi-family homes in recent months and is
helping construction to stabilize. A survey on Monday showed
sentiment among home builders edged up in July from a nine-month low in
June, but they saw no increase in prospective buyers.
Last month, housing starts for multi-family homes soared 30.4 percent
to a 176,000-unit rate, while single-family home construction -- which
accounts for the largest portion of the market -- increased 9.4 percent
to a 453,000-unit pace. New building permits rose 2.5 percent to
a 624,000-unit pace last month. Economists had expected overall
building permits in June to edge down to a 600,000-unit pace.
Permits were boosted by a 6.9 percent rise in the multi-family segment.
Permits for the construction of buildings with five units and more
increased 8.2 percent to their highest level since October 2008.
Permits to build single-family homes edged up 0.2 percent.
New home completions fell 1.7 percent to 535,000 units in June.
Housing starts, permits rebound in March
YAHOO
19 April 2011
WASHINGTON (Reuters) – U.S. housing starts and permits for future home
construction rose more than expected in March, snapping back from the
prior month's winter weather depressed levels, government data showed
on Tuesday.
The Commerce Department said housing starts rose 7.2 percent to a
seasonally adjusted annual rate of 549,000 units. February's starts
were revised up to a 512,000-unit pace from the previously reported
rate of 479,000 units.
Economists polled by Reuters had forecast housing starts rising to a
520,000-unit rate. Compared to March last year, residential
construction was down 13.4 percent.
Still, the bounce back in residential construction does not signal
recovery as an over- supply of homes continues to discourage builders
from embarking on new projects.
"It's mainly a rebound from previous month's decline. We still think
the housing market is very weak, and the high inventory is still
depressing sales and prices," said Sireen Harajli, an economist at
Credit Agricole Corporate & Investment Bank in New York.
"We hope to see some signs of improvement toward the end of the year,
but we won't see substantial improvement until 2012."
U.S. stock index futures were steady at higher levels, while government
debt prices were steady at lower levels. The dollar held at lower
levels versus the euro.
Home builders' sentiment slipped a notch in April, the National
Association of Home Builders said on Monday, with builders viewing
sales conditions now and in the next six months as unfavorable.
Residential construction was likely a drag on economic growth in the
first quarter after making a modest contribution in the last three
months of 2010. Home building accounts for about 2.4 percent of gross
domestic product.
Groundbreaking last month was lifted by a 5.8 percent rise in volatile
multifamily homes. Single-family home construction increased 7.7
percent.
New building permits advanced 11.2 percent to a 594,000-unit pace last
month, rebounding from February's record low 534,000 units. Economist
had expected overall building permits to rise to a 540,000-unit pace in
March.
Permits
were propped up last month by a 25.2 percent jump in the multifamily
segment. Permits to construct buildings with five or more units rose to
their highest level since January 2009 -- likely reflecting growing
demand for rental properties.
Permits to build single-family homes rose 5.7 percent. However, new
home completions dropped 14.2 percent to a record low 509,000 units in
March.
2010 was second worst year for home
building
DAY
By MARTIN CRUTSINGER AP Economics Writer
Article published Jan 20, 2011
U.S. homebuilders are coming off their two worst years in more than a
half-century, and the outlook for this year is only slightly better.
Economists say it could take three more years before the industry
begins building homes at a healthy rate. In the meantime, the housing
downturn is dragging on the broader economy, with one-quarter of the
jobs lost since the recession began in the construction field.
Builders normally help lead the economy out of a recession.
Construction projects fuel growth and that leads to more hiring.
But a year and a half after the recession officially ended, builders
are struggling to compete in markets flooded with unsold homes - many
of them foreclosures that are depressing prices.
"Housing in the past has always been one of the key drivers getting the
economy back on track. It is not going to happen this time because
there is a huge glut of homes out there," said Patrick Newport, U.S.
economist at IHS Global Insight.
Homebuilders broke ground on a total of 587,600 homes in 2010, just
slightly better than the 554,000 started in 2009, the Commerce
Department reported Wednesday Those are the lowest annual totals on
records dating back to 1959.
And the pace is getting worse. The Commerce Department reported
Wednesday that builders started work at a seasonally adjusted annual
rate of 529,000 new homes and apartments last month. That's a drop of
4.3 percent from November and the slowest pace since October 2009.
A big reason for the decline is that people are buying fewer
single-family homes, which represent nearly 80 percent of the market.
Single-family home construction fell 9 percent to an annual rate of
417,000 units in December.
In a healthy economy, homebuilders break ground on more than 1.5
million units a year.
Newport said he doesn't expect that level of home construction until
2014. He expects builders will start work on 685,000 homes this year,
1.09 million units in 2012, and 1.43 million in 2013.
Many potential buyers are holding off, worried that home prices haven't
bottomed out yet. A record 1 million homes were lost to foreclosure
last year and that is weighing on prices. Foreclosure tracker
RealtyTrac Inc. predicts 1.2 million homes will be repossessed this
year.
Builders are having a hard time competing with the depressed prices,
and that has led to fewer construction jobs.
Nearly 1.9 million construction jobs have vanished since the recession
began in December 2007. That's 26 percent of the 7.2 million jobs lost
during that period.
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.
Homebuilders' stock shares fell in afternoon trading. Lennar Corp.,
D.R. Horton and PulteGroup shares all dropped by nearly 3 percent.
Building permits, considered a good barometer for future activity, rose
16.7 percent in December to a seasonally adjusted annual rate of
635,000, the best pace since March.
But builders pulled more permits in California, New York and
Pennsylvania ahead of code changes in 2011 - a factor that likely
influenced the spike.
"Some builders went ahead in December with projects to beat the
change," said Jennifer Lee, an analyst at BMO Capital Markets. Lee
points out that the biggest gains were in the Northeast, which was up
80.6 percent, and the West, up 43.9 percent.
Housing construction fell in all parts of the country in December
except the West where activity surged 45.8 percent. Construction
dropped 38.4 percent in the Midwest and was down 24.7 percent in the
Northeast and 2.2 percent in the South. Severe winter weather likely
affected activity in the Northeast and Midwest.
Home construction jumps 10.5 pct in August
By ALAN ZIBEL, AP Real Estate Writer
21 September 2010
WASHINGTON – Home construction increased last month and applications
for building permits also grew. The gains were driven mainly by
apartment and condominium construction, not the much larger
single-family homes sector. Construction of new homes and
apartments rose 10.5 percent in August
from a month earlier to a seasonally adjusted annual rate of 598,000,
the Commerce Department said Tuesday. That's the highest level since
April.
Pulling the figures up was a 32 percent monthly increase in the
condominium and apartment market, a small portion of the market.
Single-family homes, which represented about 73 percent of the market
in August, grew more than 4 percent.
Housing starts are up 25 percent from their bottom in April 2009. But
they remain 74 percent below their peak in January 2006. Single-family
housing starts are up 11 percent from their low point in January 2009,
but down 78 percent from their peak in January 2006. Builders are
struggling with weak demand for new homes caused by high
unemployment and a glut of foreclosed homes on the market. They
benefited in the spring from federal tax credits, but those expired in
April.
Paul Dales, U.S. economist with Capital Economics, said the high number
of vacant homes, mounting expectations of renewed price falls and
economic constraints on households will continue to weigh on the
industry.
"Homebuilding activity remains at an astoundingly weak level," Dales
said, adding that construction has to be more than double current
levels for the market to be considered healthy.
Building permit applications, a sign of future activity, grew by nearly
2 percent to an annual rate of 569,000. Lennar Corp., a major
builder based in Miami, said Monday the number of
buyers signing agreements to purchase its homes fell 15 percent from a
year ago in the three months ended August 31.
"It's been a tough summer," said Stuart Miller, Lennar's chief
executive. on a conference call with investors Monday. "As we've gone
into September, we're seeing a little bit of pickup in our traffic, but
that shouldn't be cause to have a sigh of relief at this point."
Construction activity rose 34 percent in the West and was up 22 percent
in the Midwest and 7 percent in the South. However, construction fell
by 24 percent in the Northeast. On Monday, the National
Association of Home Builders said its monthly
index of builders' sentiment was unchanged in September at 13. The
index has now been at the lowest level since March 2009 for two
straight months. Home construction sinks, building
permits down YAHOO
By ALAN ZIBEL, AP Real Estate Writer
16 June 2010
WASHINGTON – Home construction plunged last month to the lowest level
since December as builders scaled back without a federal tax credit to
lure buyers. Building permits also fell, a sign the construction
industry won't fuel the economic recovery.
The Commerce Department said Wednesday that construction of new homes
and apartments fell 10 percent from a month earlier to a seasonally
adjusted annual rate of 593,000. April's figure was revised downward to
659,000.
The results were driven by a 17 percent decline in the single-family
market, which had benefited earlier in the year from federal tax
credits of up to $8,000. It was the largest monthly drop in
single-family construction since January 1991.
Applications for new building permits, a sign of future activity, also
fell. They sank 5.9 percent to an annual rate of 574,000, the lowest
level in a year.
The report missed Wall Street expectations by a wide margin. Economists
surveyed by Thomson Reuters had predicted that housing construction
would only fall to seasonally adjusted annual rate of 650,000 and had
forecast that building permit applications would increase to an annual
rate of 630,000.
In a typical economic recovery, the construction sector provides much
of the fuel. But that hasn't happened this time. Developers are trying
to sell a glut of homes built during the boom years. And they must
compete against foreclosed homes selling at deep discounts.
Homebuilders are feeling less confident in the recovery now that
government incentives for buyers have expired. The National Association
of Home Builders said Tuesday its housing market index fell in June
after two straight months of increases.
Builders had been more optimistic earlier in the year when buyers could
take advantage of tax credits of up to $8,000. Those incentives expired
on April 30, although buyers with signed contracts have until June 30
to complete their purchases.
Experts anticipate home sales will slow in the second half of this
year. In addition, high unemployment and tight mortgage lending. Housing construction up 2.8 percent
in January YAHOO
By MARTIN CRUTSINGER, AP Economics Writer
Feb. 17, 2010
WASHINGTON – Housing construction
posted a better-than-expected increase in January which pushed activity
to the highest level in six months. The solid gain raised hopes that
the construction industry is beginning to mount a sustained rebound
from its worst slump in decades.
The Commerce Department said
Wednesday that construction of new homes and apartments rose 2.8
percent last month to a seasonally adjusted annual rate of 591,000
units. That was better than the 580,000 annual pace that economists
were forecasting.
Applications for building permits,
considered a good barometer of future activity, fell 4.9 percent to a
rate of 621,000, but that was after two months of large increases.
In another sign of strength,
Wednesday's report revised up activity in December to show builders
were starting construction at an annual pace of 575,000 units during
that month, much stronger than the 557,000 originally reported. Even
with the upward revision, activity fell a slight 0.7 percent in
December, a dip that was blamed on severe weather in many parts of the
country that depressed construction activity.
Economists are hoping that housing
is beginning to recover and a rebound in this area will help support
the economy as it struggles to mount a sustained recovery from the
deepest recession since the 1930s.
In a separate report suggesting
strength, the Federal Reserve said industrial production rose 0.9
percent in January, the seventh consecutive monthly increase.
January's numbers rose in all three
major categories: manufacturing, mining and energy utilities. That is
the first such show of strength since August 2009.
Manufacturing rose 1.0 percent,
while mining and utilities each gained 0.7 percent, the report said.
In the housing report, the strength
last month was led by a 10 percent jump in activity in the Northeast
and an 8.9 percent increase in the West. Construction was up a smaller
1 percent in the South and 3.2 percent in the Midwest.
The strength in January pushed
construction activity up by 21.1 percent from the pace in January 2009.
Last month's building rate the fastest pace since July.
Construction of single-family homes
rose by 1.5 percent to a seasonally adjusted annual rate of 484,000
units while construction of multi-family units increased 9.2 percent to
an annual rate of 107,000 units.
The National Association of Home
Builders said Tuesday that its housing market index rose by two points
to 17 in February after having fallen for two consecutive months.
That increase in sentiment was
likely influenced by a number of favorable developments including a
report earlier this month that the nation's unemployment rate fell in
January to 9.7 percent, still high, but lower than the 10 percent of
the previous month.
In other favorable developments,
mortgage rates are hovering around 5 percent, pushed down by a Federal
Reserve program to buy mortgage-backed securities. And builders say
they are also seeing a boost in the demand for homes coming from a
government stimulus program. That program provides tax credits of up to
$8,000 for first-time home buyers and up to $6,500 for current
homeowners who decide to move.
Bob Jones, chairman of the home
builders, said builders were "slightly more optimistic that the housing
recovery is finally beginning to take root." Fewer home-building permits signal
weakness ahead
YAHOO
By MARTIN CRUTSINGER, AP Economics
Oct. 20, 2009
WASHINGTON – Applications for home building permits, a gauge of
future construction, fell in September by the largest amount in five
months — a discouraging sign for the housing industry.
The decline, in part, reflected uncertainty about whether Congress will
extend a tax credit for first-time homebuyers.
At the same time, the Commerce Department said Tuesday that
construction of new homes and apartments rose 0.5 percent last month to
a seasonally adjusted annual rate of 590,000 units. That was a weaker
showing than the 610,000 economists had expected.
The applications for building permits fell 1.2 percent in September.
That's the biggest decline since a 2.5 percent drop in April and
underscored worries that the fledgling housing revival could be
derailed by rising unemployment, tighter bank lending standards and the
expiration on Nov. 30 of the government's $8,000 tax credit for
first-time homebuyers.
Housing has been struggling to recover this year following a steep
collapse that helped pull the overall economy into the worst recession
since the 1930s.
Real estate agents and homebuilders are lobbying Congress to extend the
tax credit, an effort appears to be gaining momentum, but the
administration is being vague about its position.
Sen. Johnny Isakson, R-Ga., who spent his career as a real estate agent
before being elected to Congress, said "this market is going to die a
sudden death" without an extension.
Isakson and Sen. Christopher Dodd, D-Conn., chairman of the Senate's
banking committee, want to extend the credit until June 30 and to drop
the requirement that the credit be available only to first-time buyers.
That's estimated to cost $16.7 billion.
The lawmakers have suggested that their measure be attached to an
extension of federal assistance to the millions in danger of exhausting
unemployment insurance benefits.
Housing Secretary Shaun Donovan said at a congressional hearing Tuesday
that supporting the housing market "can be very expensive, especially
at a time of significant budget deficits."
The administration will make a recommendation on whether to extend the
credit in the coming weeks, after studying data on tax filings from the
Internal Revenue Service. While there would be some negative effects if
it were allowed to expire, Donovan said, "I do not believe that a
catastrophic decline would be the result."
Some analysts and lawmakers are skeptical about extending the credit,
arguing that most homebuyers who receive it would have decided to buy
anyway. And soaring unemployment is likely to dull the impact of any
extension, Mark Vitner, a senior economist with Wells Fargo Securities,
wrote in a note to clients.
"Many of the most likely buyers targeted have already taken advantage
of the program," he wrote.
Meanwhile, the Labor Department said wholesale prices fell 0.6 percent
last month on a drop in energy costs. Outside food and energy, core
inflation fell 0.1 percent. In the 12 months ending in September, core
wholesale prices rose a modest 1.8 percent.
People thought... that
this golden goose would continue to lay golden eggs for ever 
