Archive for May, 2009
Foreclosed homes may become an increasingly hot-ticket item in real estate, according to joint data from Trulia.com and RealtyTrac, which shows a notable gain in consumers' willingness to buy such properties.
55% of survey participants indicate they are at least somewhat likely to consider purchasing a foreclosed home in the near future, compared to the 47% who said the same in November 2008.
In the current market, potential buyers view foreclosed homes as an even greater bargain than they did last year, as 40% expect to pay at least 50% less for a foreclosed property. Only 31% expected a 50% discount in November.
And with foreclosure activity up 32% from last year, bargain hunters will have plenty of choices. One in every 374 US housing units received a foreclosure filing in April, the highest rate seen by RealtyTrac, which has tracked activity since January '05.
New home builders are already bracing for the stiff competition created by high volumes of deeply discounted properties associated with foreclosures. A report released today by DataQuick shows foreclosure resales accounted for 53% of all sales in southern California during April.
But while overall consumer interest in buying foreclosed homes has increased, the current study also found higher levels of negative sentiment around purchasing such properties. A significant 85% of respondents feel there are negative aspects to purchasing a foreclosed home, compared to 80% in November.
Within the 85%: 71% cite hidden costs as their top concern, 46% believe the process is risky and 31% are concerned that the home will lose value.
"Although consumers are aware that there may be some challenges involved in purchasing a foreclosed home, they are very interested in the bargain opportunities available in the foreclosure market," says Rick Sharga, senior vice president of RealtyTrac. "People want the best deals they can find and they are willing to go outside of their comfort zones…"
Write to Kelly Curran.
Total mortgage application volume sits 42% above levels seen in the same time last year, according to a weekly survey released today by the Mortgage Bankers Association (MBA). The gain in interest comes even as mortgage lenders tighten underwriting standards, making cheap credit at historic low interest rates more difficult for some borrowers to obtain than ever.
The volume of mortgage loan applications submitted in the week ending May 15 showed a week-over-week gain of 2.3%. Applications for refinance mortgages alone rose 4.5%, while applications for purchase loans slipped 4.4% from a weak earlier.
Refinance applications accounted for 73.6% of total applications this week, up from 71.9% in the previous week, illustrating the strong overall interest in refinancing.
A separate survey that adjusts raw data to count multiple applications from a single household as one entry — effectively breaking down total mortgage application activity to the total volume of households applying for mortgages — saw activity decline 1.2% from the previous week ending May 8.
This Mortgage Application Index — or MAX — indicates that fewer households submitted applications this week, despite the MBA's results that total applications increased.
The MAX publisher Paul Descloux, in his weekly commentary on the index, attributes this to the unwinding of credit excesses that causes many lenders to tighten underwriting standards — and many prospective borrowers to find themselves turned away. A decrease in household activity might indicate reduced optimism on the part of people either looking to buy a home or refinance their current mortgage.
And as for the optimistic ones that applied this week, Descloux says, only time will tell. "Though some may be able to refinance, perhaps a quarter of all homeowners now have to deal with negative equity against the backdrop of ballooning unemployment," he writes.
Visit www.mbaa.org and www.mortgagemaxx.us for further details.
Write to Diana Golobay.
April proved a somewhat dismal month for architects, as they experienced lower billings — a leading economic indicator of construction activity — but a surge in new project inquiries may cast a rosier picture for the real estate market in the relatively near future.
The American Institute of Architects' (AIA) Architecture Billings Index (ABI), which reflects the approximate nine to twelve month lag time between architecture billings and construction spending, reported a rating of 42.8 in April, down from 43.7 in March.
The nation's northeastern region fared comparatively best, posting a 47.1 on the billings index, while the West's ABI rating was lowest at 39.2. The mixed practice sector comprised the majority of billings, followed by institutional real estate, multi-family residential and commercial real estate.
April marks the first time since August and September 2008 that the index was above 40 for two consecutive months. But the Institute warns the score still indicates an overall decline in demand for design services, as the score must ring in above 50 to indicate an increase in billings.
The new projects inquiry score, however, sits at 56.8.
"The most encouraging part of this news is that this is the second month with very strong inquiries for new projects," says AIA chief economist Kermit Baker. "A growing number of architecture firms report potential projects arising from federal stimulus funds."
Write to Kelly Curran.
Longtime HW readers might recall a chart we publicized years ago from Credit Suisse that looked at loan resets and recasts — it's since become widely part of the housing blogosphere, but we were actually the first to disseminate it publicly years ago.
Today, the OC Register's Mathew Padilla has the first update to this chart that's been publicly released since we first published the original chart in mid-2007. And it shows pretty clearly why the nation's housing mess is far from over — and let's be honest, it illustrates the real pain California has facing it in the next few years. Like through 2012 and into 2013. Remember, foreclosures take time to work through the pipeline; while new defaults on subprime loans are on the downswing, foreclosure sales on subprime loans are surging as are REO counts. Expect the same to happen as we move up the credit spectrum here into Option ARMs.
Here's the chart:
I've seen more than a few mortgage analysts ask the question lately as to whether we've been overreacting to loss severities and loss frequencies on Option ARM loans — this chart should make it clear that the answer is a definitive "no."
Months ahead of the US Department of Housing and Urban Development's new regulatory requirements that will force lenders to provide revised good faith estimates (GFEs) and other disclosure documents to create more transparency at the closing table, industry professionals are getting compliant.
The revisions to HUD's Real Estate Settlement and Procedures Act (RESPA) face industry criticism that forced disclosure of closing costs removes competitive forces for parties like mortgage brokers. But supporters of the transparency efforts say the revisions will help borrowers better understand all the costs involved with obtaining a mortgage.
For better or worse, the industry faces considerable changes in around six months and service and technology providers are working ahead of the deadline to help lenders achieve compliance.
Compliance technology provider Wolters Kluwer Financial Services today launched its new RESPA resource Web site, which provides lenders with updated information on the rule changes as well as related laws that might affect the way they conduct business. The site aims to provide the information necessary for lenders to meet HUD's mandatory Jan 1, 2010 compliance deadline.
"Wolters Kluwer Financial Services has a strong track record of helping financial institutions rapidly and efficiently comply with regulatory change," said Jason Marx, an executive at the company's mortgage branch, in a media statement.
Write to Diana Golobay.
Pleasanton, Calif.-based Ellie Mae said Wednesday that a technology enabling third party originators to submit loan applications and other related information directly from their loan origination systems into a lender's website had received at patent from the United States Patent and Trademark Office.
The company's new patent on its ePASS ClickLoan technology represents the second patent approved in recent months, the company said in a press statement.
Launched in 2002, ClickLoan enables loan originators to provide loan data and information for pre-qualifications, loan submissions, rate locks and ordering of settlement services, all directly from within the chosen lender’s website. It works by automatically identifying a loan application or its required information from within the originator’s LOS, and integrating that data or information directly into the lender’s site. ClickLoan is a feature of ePASS, Ellie Mae’s electronic information transfer platform; the company says it "can be integrated into any wholesale or correspondent lender’s existing website."
Mortgage tech firms have long taken to patenting their work as a way to prevent subsequent "me-too" implementation of any firm's work to streamline the mortgage origination process.
"We respect the intellectual property rights of others and will continue to seek protection for the innovations developed at Ellie Mae to protect our investment in research and development," said Limin Hu, chief technology officer. "This patent demonstrates our commitment to protecting our technological innovations and is part of our continuing effort to bring value to our shareholders and Ellie Mae as an organization.”
Write to Paul Jackson.
US Treasury Department secretary Tim Geithner, in his testimony before the Senate Banking Committee today, says markets are recovering and private capital is flowing once more.
He cites narrowed spreads on corporate and municipal bonds, smaller risk premiums in short-term, inter-banck markets and decreased credit protection costs at the largest US banks as indicators of said recovery.
But initial signs of recovery are not enough, as Geither goes on to outline continued objectives in the Administration's plans to turn the tentative recovery into long-term growth. In the immediate short term, President Barack Obama plans to keep mortgage rates low as traffic in asset-backed securities picks up and banks must become more transparent, he says.
The Administration's focus in coming weeks will remain on assisting smaller banks in cleaning up so-called "legacy" (or "toxic" to those less sensitive) loans and reducing systemic risk in the broader banking system. New regulations will prevent large financial institution from another collapse, with distressed asset programs to start in six weeks, Geithner says.
"Stability is not enough," he said. "We need a financial system that is not deepening or lengthening the recession, and once the conditions for recovery are in place, we need a financial system that is able to provide credit on the scale that a growing economy requires."
Write to Diana Golobay.
Troubled Florida-based thrift BankUnited Financial saw a number of bidders present their offers yesterday, as the bank looks to sell itself after receiving a 'deal or die' directive from the Office of Thrift Supervision last month.
The Federal Deposit Insurance Corp. is overseeing the sale process, and closed bids yesterday afternoon.
It is likely to place the bank into receivership according to a MarketWatch report earlier this week; sources tell HousingWire that the bank will likely be put into receivership this Friday and then sold to the winning bidder. Private equity bidders are likely to want the bank's 'bad' assets stripped off the balance sheet and acquire the bank via loss sharing agreements — akin to what regulators did in selling failed IndyMac Bank to a consortium of investors earlier this year.
Among those bidding, the lead bidder is yet again WL Ross & Company, which had earlier made overtures to acquire the troubled bank and was rebuffed. Billionaire investor Wilbur Ross's firm has been on a bad-mortgage acquisition tear as of late, turning Irving, Tex.-based affiliate American Home Mortgage Servicing, Inc. into the nation's largest independent mortgage servicing platform and the nation's largest subprime servicer.
At BankUnited, the mortgages on its books are not subprime loans but include a hefty exposure to quickly-souring Option ARM mortgages — where borrowers have seen not only the value of their homes in Florida shrink, but the balances owed on their mortgage debt mushroom as well.
Ross isn't working alone: Bidding alongside WL Ross in the same consortium were The Blackstone Group, the Carlyle Group and Centerbridge Partners, according to various press reports.
Other competing groups included Goldman Sachs (GS: 111.77 +2.96%), which reportedly partnered with TD Bank to submit a bid, according to a report in the Miami Herald.
But the Ross group seems to have pole position on acquiring the bank at this point, sources suggested to HousingWire Wednesday morning. The investor group has gone as far as to hire John Kanas, the former chief executive of North Fork Bancorp, to run BankUnited should WLRoss and the consortium prove successful in bidding.
Investors in BankUnited's common stock — some of whom have written our editorial staff this week — are rightfully worried about the future of the bank; any receivership by the FDIC typically wipes out all shareholders.
Write to Paul Jackson.
Most industry leaders anticipate an increasing volume of distressed properties and fluctuating loan-to-value ratios over the next several quarters as default and REO properties continue to enter the market.
Default management services provider, Integrated Asset Services, unveiled a tool to help mortgage servicers manage and more accurately value these distressed residential properties and loans.
"Financial institutions and mortgage servicers need a fast and affordable way to review their portfolios and make decisions for each individual loan," says Dave McCarthy, president and CEO of Integrated Asset Services. "The distressed valuation feature is a way to individualize the value of each property according to the state of the local market and the property-specific factors that may negatively impact value."
The new feature is located within the iValue suite of automated valuation products. It extends the automated valuation model (AVM) to extract and weigh key data points that indicate whether a property is considered distressed.
The feature will identify and flag those properties that are in some state of distress. It applies neighborhood analytics to search and select area listings and sales that can be identified as troubled, enabling the AVM to utilize relevant comparables.
The company says the methodology isolates and monitors price trends for distressed properties in a local market, allowing the model to accurately establish the spread between retail market value and distressed value.
Write to Kelly Curran.
[Update 1 reflects the official signing of the bills into law]
The US House of Representatives kept itself busy this week, passing two pieces of housing legislation that might bear the President's signature by the end of the day.
Both measures look to crack down on fraud in the mortgage process, encourage sustainable mortgages and bolster the federal deposit insurance fund to protect depositors in the growing wake of bank failures.
The House approved the Helping Families Save Their Homes Act in a 244-3 vote late Tuesday.
The legislation providers for a servicer safe harbor from legal action for initiating qualified loss mitigation programs like modifications. It also alters the borrower qualifications for the Federal Housing Administration's Hope for Homeowners refinance program; mainly, borrowers must certify real need for the program and not default on their existing mortgage intentionally so as to qualify.
The bill also expands the Federal Deposit Insurance Corp.'s borrowing authority from the Treasury Department to $100bn and provides the FDIC with $500bn in credit through 2010. The increased borrowing capacity would bolster the FDIC's Deposit Insurance Fund, which took multi-billion dollar hits from dozens of failed banks so far in '09.
President Barack Obama signed the legislation late Wednesday. Also receiving his signature that afternoon was a mortgage fraud bill (S386), which the House approved late Monday and which allows $490m to government and regulator departments to crack down on mortgage fraud.
Write to Diana Golobay.
