Archive for September, 2009
Foreclosure filings eased slightly in August from a month earlier but remain significantly higher than year-ago levels despite lower levels of real estate-owned (REO) properties, according to foreclosure data provider RealtyTrac.
Total filings including default notices, scheduled auctions and bank repossessions 0.5% since July to 358,471 US properties in August.
The volume of filings came in 18% higher than the same month last year, with a foreclosure filing received on one in every 357 US housing units in August.
“The August report demonstrates that there is still an ample supply of properties filling the foreclosure pipeline even while the outflow of bank-owned REO properties onto the resale market is being more carefully regulated,” said James Saccacio, chief executive officer of RealtyTrac.
“After hitting a high for the year in July," Saccacio added, "REOs dropped 13% in August, but we also saw a record high number of properties either entering default or being scheduled for a public foreclosure auction for the first time.”
Nevada posted the highest foreclosure rate with one in every 62 units receiving a filing in the month. Florida followed with one in every 140 units receiving a filing and California trailed in a close third with one in every 144 units receiving a filing.
Vermont claimed the lowest rate with only 33 units — one in every 9,437 — receiving a filing. North Dakota followed with filings received on 33 — one in every 9,411 — units. West Virginia rounded out the bottom three state foreclosure rates with 143 housing units — or one in every 6,173 — receiving a filing in the month.
Write to Diana Golobay.
The mortgage servicing industry in coming weeks will see details of an incentive program aimed to prevent foreclosures by encouraging servicers to pursue short sales and deeds-in-lieu of foreclosure.
US Treasury Department sources confirmed to HousingWire the Treasury expects to issue details on the short sale and deed-in-lieu program later this month.
The program is being finalized and will be announced as soon as possible, according to testimony Wednesday by Federal Housing Administration (FHA) commissioner David Stevens.
He said at a House Financial Services subcommittee hearing that the Making Home Affordable (MHA) Program is on track to provide modifications and refinancings to millions of homeowners, but noted other foreclosure alternatives exist.
"Because we know that the MHA program will not reach every at-risk homeowner or prevent all foreclosures, on May 14th the Administration announced the Foreclosure Alternatives program that will provide incentives for, and encourage, servicers and borrowers to pursue short sales and deeds-in-lieu (DIL) of foreclosure in cases where the borrower is generally eligible for a MHA modification but does not qualify or is unable to complete the process," he said, according to prepared remarks.
He said the program will simplify the process of pursuing short sales and deeds-in-lieu, which will encourage more servicers and borrowers to participate in the program. The program will standardize the process, documentation and short performance timeframes.
"These options eliminate the need for potentially lengthy and expensive foreclosure proceedings, preserve the physical condition and value of the property by reducing the time a property is vacant, and allows the homeowners to transition with dignity to more affordable housing," Stevens added.
Distressed sales — including short sales and foreclosures — accounted for nearly one-third of all house re-sales in recent months, leading to the National Association of Realtors to offer a short sales and foreclosure certification program to realtors.
At the same time, tech vendors and mortgage service providers are looking to fill the demand for short sale-related products and services. Equi-Trax Asset Solutions recently launched a new current listing search offering that searches a servicer’s portfolio to determine short sale and modification opportunities.
Write to Diana Golobay.
[Update 1: clarifies role of REO properties in index]
Lender Processing Services' (LPS: 16.78 +1.39%) newest home price index calculates the impact real estate owned (REO) properties have on regional homes prices. For instance, during the peak of the housing boom, less than 3% of home sales in California were REO transactions. Now, REO sales account for more than 52% of all sales in the state.
In Michigan, another state hit hard by the crisis, REO sales account for 64% of sales during the first half of 2009. Non-REO home sales prices have dropped more than 26% since peaking in 2005, but when REO sales are included, that decrease is nearly 47%.
But in states that aren’t experiencing as much of an increase in REO sales, like Massachusetts, where REO sales account for 14% of the state’s sales volume, non-REO prices have gone down 15%. When REOs are included, the decrease in price is 19%.
“In some respects, the findings of this study are really not that surprising,” Nima Nattagh, senior vice president of LPS Applied Analytics told HousingWire. “The extent of which of what we’ve seen in the housing market is that it’s very much a regional phenomenon. The impact seems to be much more severe in certain states, while other states have not been as badly impacted.”
While the study shows that home sales prices would be higher without REO properties included, it can’t predict changes in the volume or prices for non-REO sales if the REO properties weren’t on the market.
And while REO sales are accounting for the lion’s share of sales activity, Nattagh said, there is no gauge of what percentage the balance of the transactions are short sales.
“Clearly, if you exclude the REOs, the trend in prices is different because REOs are selling at a discount,” Nattagh said. “The real point is to show that if you have a high volume of REO sales, that is in fact the market, and therefore you should be relying on indices that take into account REO sales.”
The difference in sales prices with and without REO sales is a critical component to the argument among many appraisal professionals on whether REO sales should be a factor in appraisals.
“You can make that argument very strongly in California, Florida, Michigan and Arizona, but perhaps you can’t make that argument as strongly in places like Seattle, New York, Massachusetts, or Connecticut because the REO volume is not the dominate factor in the market,” Nattagh said.
Another uncertainty, Nattagh said, is whether the housing market really has bottomed out, as many have predicted.
“It’s still too early to say that the market has stabilized and accordingly, we’d like to see at least another three or four months of data to have a better read on the market,” he said.
Write to Austin Kilgore.
While many price reports have indicated an increase in home prices this summer, another price index suggests that the short ride may be over.
The average sales price in the Altos Research 10-City Composite Index, a measure of home data in 10 major US metro regions, effectively bottomed out in January at $470,017, and climbed every month this year — including a July increase of 0.9% — until August, when it decreased 0.6%.
Altos Research said it is a sign of an early start to the seasonally slow fall and winter months. The 10-City Composite Index was $506,180 in August. Average prices increased in only five of 26 major markets surveyed in August.
“While lagging sources of housing market data are starting to report price increases, The Altos 10-City Composite Index now shows that the season spring buying season, and economic stimulus have run their course,” the report said.
Inventory also declined in 22 of 26 major markets, lead by a 6.4% decrease in San Jose and a 5.1% decrease in San Francisco. The 10-City Composite Index inventory declined 2.6%. In San Diego, inventory increase 1.6%.
Altos Research said the decrease was a positive sign as the housing market enters a slow season, since typically fewer borrowers participate in fall and winter months.
The median number of days homes stayed on the market was above 100 days in all of the 26 markets except San Francisco. Miami had the longest median listing time of 251 days, more than eight months.
Write to Austin Kilgore.
Wells Fargo (WFC: 29.60 +1.89%) completed 33,172 trial and final loan modifications through August 2009 under the Home Affordable Modification Program (HAMP), a program that provides incentives to servicers for loan modification.
Wells Fargo’s modification total increased by 64% over the past 30 days. Using its own programs, the lender modified 251,244 home loans, bringing the 2009 total to 284,416, according to a corporate release.
"We are well on our way to exceeding our share of the government's 500,000 Home Affordable Modifications Nov. 1 goal," said Mike Heid, co-president of Wells Fargo Home Mortgage.
Wells Fargo also expects to exceed their HAMP goal of approximately 60,000 modifications.
The Association of Community Organizations for Reform Now (ACORN) acknowledged Wells Fargo’s progress in their HAMP participation in a conference call, but still called on other servicers to step up.
“We’re starting to see more solutions happening out in the field. We are seeing progress, just not a large amount,” said Bruce Dorpalen, ACORN’s director of housing counseling.
Dorpalen cited Aurora Loan Services’ performance. The servicing firm out of Littleton, Colo. receives a $798m incentive cap from HAMP, according the transaction report from the Troubled Asset Relief Program (TARP).
“If Aurora continued on their current pace, it would be six and a half years to complete their portfolio,” Dorpalen said.
ACORN also proposed that HAMP begin permitting borrowers to re-modify their loan with the program. Currently, HAMP only allows “one bite at the apple,” but people will need to another workout after the Administration gets homeowners through the next couple of years, Dorpalen said.
Servicers also use the three-month trial modification to finish the details of the permanent modification that waits beyond, and ACORN found discrepancies between the two.
“When people are offered trial modifications, they aren’t being told what the permanent modifications are,” Dorpalen said. “We’ve gotten a flurry of people who’ve come to us with that.”
Both Wells Fargo and ACORN reached an agreement on whether or not banks prefer foreclosures to modifications.
"There is a common misperception that we make money off of foreclosures, and there is nothing further from the truth,” Wells Fargo’s Heid said. “No one benefits from foreclosures."
Write to Jon Prior.
The first-time homebuyer tax credit is helping the housing market recover, especially in the low end of the market for much of the country, according to the Federal Reserve's Commentary on Current Economic Conditions, also known as the Beige Book.
The report, issued eight times a year, is a compilation of economic reports from the Fed’s 12 district banks, which in September said while residential real estate markets remain weak, there are signs of improvement.
The Chicago, Richmond, Boston and San Francisco Districts experienced an increase in sales over the past six weeks, while the Boston, Cleveland, Dallas, Kansas City, Richmond and New York districts reported the first-time homebuyer tax incentive contributed to increased sales. Philadelphia reported steady activity.
Most districts reported sales below the last year’s levels, but the Atlanta, New York, Cleveland, and Minneapolis districts experienced year-over-year gains in select markets.
The St. Louis district reported residential home sales had not improved in the Midwest.
While the recent increase in activity has been focused on the low-priced end of the market, the Philadelphia market reported an increase in sales at the upper end of the market.
While prices continue to face downward pressure, Dallas and New York reported some increases.
Mortgage activity was mixed in the districts. The Philadelphia, Cleveland and Kansas City districts reported activity had declined modestly, but Richmond saw an increase it attributed to improved demand for starter homes. The Dallas district reported an increase in refinance activity.
The lack of available credit continues to pressure both residential and commercial contractors in Cleveland, and commercial real estate borrowers in Atlanta, while San Francisco reported an increase in venture capital investment.
Philadelphia, Richmond, Dallas, and San Francisco noted further deterioration in credit quality, but Cleveland observed some improvement in credit quality.
Write to Austin Kilgore.
Collateral performance within the US securitization market will remain weak well into 2011 before achieving any kind of recovery, according to Moody's Investors Service.
Troubled performance remains in consumer loan-backed securitizations as long as unemployment stays high and home prices stay depressed, the firm said in market commentary Wednesday.
Performance within asset-backed securities (ABS) may improve as government-sponsored lending programs and stimulus efforts take greater effect. ABS issuance, on the other hand, depends on investor interest and evolving regulation.
"There is significant uncertainty around changes in disclosure and regulatory regimes for the securitization markets which, along with higher investor risk premiums, will result in increased cost of securitization for issuers," says Moody's senior managing director Claire Robinson.
Residential mortgage-backed securities (RMBS) performance will deteriorate into 2010 as house prices fall, "despite some recent signs that the decline is slowing," Moody's said. The firm does not expect investor interest to boost recovery for at least 12-18 months.
Commercial real estate loan performance tends to lag in both entering and exiting recession, and Moody's expects this sector to show deteriorating performance into 2011.
"Loan delinquency, property value and other underlying performance metrics have deteriorated significantly from their pre-credit crisis levels," Moody's said.
These pressures on the commercial mortgage sector may push the default rate beyond 4% before 2010. A significant volume of Option ARMs set to recast by 2011 may further pressuring overall loan performance and pose a greater risk of borrower default. The pressure of delinquency and rising unemployment, along with the foreclosure pipeline, keeps Credit Suisse's (CS: 26.78 +0.26%) overall outlook on the US housing market cautiously optimistic this week.
With overall ABS issuance low as market observers wait to call a housing market bottom, investors are being presented with other options, according to Andrew Akers, managing director and head of advisory, asset management and capital markets firm Capital Markets Solutions at NewOak Capital.
“[S]ecuritization is increasingly being used to repair rather than manufacture," Akers said in market commentary this week. "Re-REMIC and other repacking is simply the acknowledgement of the simple fact that under any cash flowing security, the earlier cashflows are less risky than the later ones."
Akers added: "Combined with the fundamental aspect of securitization that implements rule-based, structural claims priorities on such cashflows and differing risk-return preferences in the market, most assuredly further completes the financial markets and adds to liquidity.”
Write to Diana Golobay.
In the October magazine issue of HousingWire, Linda Lowell studies the changing face of the securitization industry and explores the merit of a $1trn Ginnie Mae market.
Keith Murray is the president and CEO of PCV Murcor, Real Estate Services. Keith founded PCV Murcor in 1981 as a local real estate appraisal company serving southern California. Since its inception, the company has grown to a nationwide firm that provides a myriad of real estate services throughout the United States. Keith has over 25 years experience in real estate analysis, consultation and valuation.
For this installment of In This Corner, Keith discusses how his company tackles the challenges in today's housing market.
HW: How is the entire appraisal sector evolving to meet the demands of such a volatile housing market, where prices are in such a state of flux?
Keith: "The demand for increased amounts of supporting data in the appraisal, including the recent implementation of the 1004MC, along with a much higher level of scrutiny throughout the process are the most notable results of the market volatility impact on valuation providers. Appraisers have to be able to weigh in convincingly about the impact of a variety of factors that influence value. The evolution in the appraisal industry is in fact a return to the basics of true market analysis."
HW: Is technology meeting the challenges of valuating all of the REO assets that are hitting the market (and likely to double, triple even)? How are these methods changing?
Keith: "With the vast number of providers offering automated tools in the market, obtaining valuations on the ever increasing volume can be easily accomplished. The real challenge is obtaining accurate estimates of value that consider the various forces within the micro markets. I think it’s important that corporate sellers have a strategy that includes a cascade of valuation tools geared toward the specific market, price range and potential loss severity of their assets. In some markets automated tools will deliver reasonable results. While the methods aren’t necessarily changing, our customers are relying on solutions that marry technology with market experts to deliver accurate results."
HW: Your Vendor Resource Management division must be expanding, no? Can you discuss why loss mitigation is key to understanding the value of assets as a whole? How are all of these things now connected?
Keith: "Yes, VRM has grown significantly over the last few years. Vendor Resource Management remains philosophically aligned with its clients as it relates to keeping as many borrowers in their home as possible. We know this is necessary to preserve communities nationwide. The valuation aspect of loss mitigation ensures that whether it is the borrower selling their home, or lending institutions assisting in pre-foreclosure solutions and post foreclosure that a home is marketed and sold at the highest possible price. In order to ensure this success it is important to remember that the best sales price begins with proper valuation."
HW: VRM extols the ability of its staff to effectively manage asset managers. Can you briefly describe how the company is able to achieve this accomplishment?
Keith: "VRM utilizes in house licensed real estate professionals with an average tenure of 10 years to negotiate the disposition of its clients' assets. This ensures that our partners in the field are working with people who understand the specific challenges associated with the marketing of real estate. This allows our customers to get the best possible support managing the disposition of their assets allowing asset resolution quickly and effectively."
Laguna Hills, Calif.-based mortgage software developer QuestSoft upgraded its compliance software products to meet the terms of pending legislation affecting the mortgage industry.
The changes ensure lenders using the software products can track, test, monitor and report in accordance to the regulations of the Home Mortgage Disclosure Act (HMDA), the Real Estate Settlement Procedures Act (RESPA) and the Mortgage Disclosure Improvement Act (MDIA), the Truth in Lending Act (TILA) and state and local lending laws.
QuestSoft’s offerings evaluate a loan file against a comprehensive list of compliance regulations and standards, the company said.
“There have been more major revisions and new regulations in 2009 than any year in recent memory,” said Leonard Ryan, president of QuestSoft in a statement.
“Every lender is under regulatory pressure, but each lender also has distinct needs, depending on institution type, for automation and reporting,” he added.
Write to Austin Kilgore.
The House Financial Services Subcommittee on Housing and Community Opportunity on Wednesday studied the progress of the Making Home Affordable Program (MHA Program).
On March 4, 2009, the Obama Administration introduced MHA Program to stabilize the housing market and reduce monthly mortgage payments for Americans. The program aimed to help 3-4m homeowners, and so far 15% of eligible homeowners — or 2.7m — received help after six months, according to Federal Housing Administration (FHA) commissioner David Stevens.
“MHA has achieved clear success in a relative short time period and there are some indications that the housing market is stabilizing with home price declines slowing,” he said in prepared testimony delivered to the House subcommittee hearing Wednesday.
Not all agree on the need for the MHA Program. The ranking member on the House committee, Spencer Bachus (R-Ala.), said the program was unnecessary.
“As long as people are losing jobs, they’re going to lose their homes. We need to let the private sector create those jobs, and that’s how we’re going to save those homes,” Bachus said.
Barney Frank (D-Mass.), the committee’s chairman, said although it would be useful to get more jobs, the majority of foreclosures are not related to job loss because the foreclosure crisis began last year when the unemployment rate was healthier.
Since the MHA Program began, 48 servicers, representing 85% of the market, joined the Home Affordable Modification Program (HAMP), which provides incentive payments to servicers, lender/investors and borrowers that participate. In a recent progress report, the servicers had extended more than 571,000 loan modification offers. Of those, 360,000 entered the 90-day trial period, a required task before the modification becomes permanent, FHA's Stevens said.
He also noted the obstacles facing MHA Program servicers and borrowers, recognizing that a needed improvement in the responsiveness and accountability of servicers to reach more homeowners and to streamline the processing of applications that have just entered into the program.
HousingWire reported in August an uneven performance among servicers initially participating in the program. In July, Treasury secretary Timothy Geithner and the Housing and Urban Development (HUD) secretary Shaun Donovan sent a letter to servicers urging them to do more.
On July 28, a meeting between the servicers and Admistration officials developed three steps to improve the program: public reports of servicer performance, working with servicers to improve operations and the development of a “second look” program to catch applications that fall through the cracks.
Mary Coffin, executive vice president of Wells Fargo Home Servicing, one of the HAMP particpators that received the letter and attended the meeting, noted the 200% increase in borrowers that have requested assistance from the program, in a statement prepared for the hearing Wednesday.
"Despite widespread decreases in home values, more than 92% of our customers in our entire servicing portfolio remain current on their mortgage payments," Coffin said.
Michael Barr, the Treasury assistant secretary for financial institutions said in written testimony that servicers at the meeting committed to reaching a target of 500,000 trial modifications by Nov. 1, 2009.
When asked at the hearing what the expected rate of enrollment would be in the future, Barr stated that the program is on track to reach nearly 4m borrowers over the next three years.
Write to Jon Prior.
