Archive for December, 2009
First American CoreLogic projects continued short-term declines through winter, followed by price improvements in the spring.
The firm projects the country’s 45 largest markets will decline an additional 4.2%, driven by a surge in foreclosure resales hitting the market. But a decline in unemployment and improvement in inventory levels will help prices bottom out in March 2010 and prices will experience a 1% year-over-year appreciation by October 2010.
The metropolitan statistical areas (MSAs) with the largest projected declines during the next six months include Detroit (12.7%), Warren-Troy-Farmington Hills, Mich. (11.4%), and Cleveland (6.3%).
MSAs projected to see the strongest improvements during the next six months are all in California — San Francisco (5.7%), Los Angeles (5%), San Diego (4.7%) and Sacramento (4.6%).
“We are continuing to see improvements in the year-over-year home price change as prices have remained relatively stable since April,” said First American CoreLogic chief economist Mark Fleming. “The additional government support for the housing market has stimulated demand and restricted supply in 2009. How these government supports are removed in 2010 and the moderation of pending inventory and negative equity will be critical to the continued stability of the housing market,” he said.
National home prices declined 7.8% year-over-year in October, according the firm’s home price index. The decline is less than the 9.5% year-over-year decrease in September. Month-over-month, prices declined 0.7% between September and October.
Excluding distressed sales, year-over-year prices declined 5.8% in October, an improvement from the 6.3% year-over-year decline in September. The national HPI is 30.1% below its April 2006 peak. Excluding distressed sales, it’s down 21.5%.
Nevada experienced the greatest year-over-year price decline at 24.3% in October, followed by Arizona (17.3%), Florida (15.5%), Michigan (13.9%) and Idaho (12.1%).
Excluding distressed sales, Nevada is still the worst performing state, with a 20.2% year-over-year decline in October. Arizona (14.7%), Florida (13.7%), West Virginia (10.4%) and Washington (9.4%) round out the top five worst performing states.
Write to Austin Kilgore.
Selene Residential Mortgage Opportunity Fund (SRMOF) acquired a mortgage portfolio from Taylor Bean & Whitaker, sources confirmed to HousingWire.
In August, TBW filed for bankruptcy with the US Bankruptcy Court Middle District of Florida after the US Department of Housing and Urban Development (HUD) suspended its FHA-approved status.
Both the US Bankruptcy Court and the law office of Troutman Sanders, special counsel to the debtor in the case, confirmed the approval of the sale at a Dec. 15 hearing.
Ranieri Partners Management is the fund manager of the SRMOF, according to a memo from Ranieri Partners to the Federal Deposit Insurance Corp. (FDIC) and the US Treasury Department, dated April 9, 2009.
According to the memo, the fund invests in distressed residential mortgage loans and real estate owned (REO) property. For all of the assets acquired, the servicing is placed with Selene Finance, which is owned by Ranieri Partners Management and Witmer Partners.
HousingWire reported on the formation of the fund in May 2008, when Lewis Ranieri, the mortgage-backed bond market innovator, raised money from investors in New York, Ohio and Pennsylvania, including $200m from the South Carolina Retirement System.
Sources told HousingWire that the sale from TBW includes more than 1,000 REO properties with a price tag of roughly $82m.
Write to Jon Prior.
[Update 1: clarifies HAMP statisitics]
Overall mortgage performance continues to decline, but re-default rates on modified loans are improving, according to a report from the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS).
The report provides performance data on 65% of all outstanding mortgages in the US, totaling 34m loans and $6trn in principal balances.
The overall mortgage performance continues suffer as borrowers face rising unemployment and falling home values. The percentage of current performing mortgages dropped 1.5% from the previous quarter to 87.2%. Seriously delinquent mortgages – those behind 60 or more days – climbed to 6.2%, a 16.7% increase from Q209. New foreclosure actions took place on more than 369,000 loans, and of all the mortgages studied, 3.2% fell into the foreclosure process.
The report also showed delinquencies creeping into prime mortgage pools. The percentage of prime mortgages falling into serious delinquency reached 3.6% in Q309, up 19.6% from the previous quarter.
On the servicing side, large national banks and thrifts implemented more than 2.4m loan modifications, trial period plans or payment plans between Jan. 1, 2008 and Sept. 30, 2009. Servicers took more than 680,000 home-retention actions in Q309, up 68.7% from the previous quarter.
Under the Home Affordable Modification Program (HAMP), the 13 largest national banks and thrift servicers initiated more than 273,000 trial modifications during Q309. In addition to HAMP trials, servicers started more than 121,000 trials under their own plans, a 100% increase from Q209.
Through HAMP, the US Treasury Department allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. According to the latest reports, more than servicers issued 30,000 permanent modifications under the program.
The re-default rate on modified loans seems to be improving for newer vintages. Of the most recent modifications made in Q209, 18.7% were 60 or more days delinquent three months after the modification, compared to 33.3% in Q208 and 30.7% in Q109.
“This lower three-month re-default rate may be an early indicator of sustainability for loan modifications that reduce monthly payments,” according to the report.
The report draws a direct line between lower re-default rates and modifications that significantly reduce the monthly payment. For modifications that reduce the payment by 20% or more, 14.9% re-default after three months, compared to 19.9% on reduced payments beteen 10-and-20%. When a monthly payment is reduced by less than 10%, more than 22% of those loans re-default within three months. Loans with unchanged payment plans re-default three months later 49.9% of the time.
“While lower payments reduce monthly cash flows to mortgage investors, the payments may also result in longer term sustainability of the payments,” according to the report.
Write to Jon Prior.
Derivatives activity in the US banking system continues to be dominated by a few large institutions, but credit risk in bank trading activities fell again in Q309, according to a report by the Office of the Comptroller of the Currency (OCC).
Net current credit exposure, which OCC uses to measure credit risk in trading activity, declined 13% to $484bn in the quarter.
Credit derivatives fell 3% in Q309 to $13trn. Credit derivative outstandings fell 21% off a Q108 peak of $16.4trn. They fell 19% in 2009 alone.
The OCC's report, based on information provided by insured US commercial banks, trust companies and US financial holding companies (and available to download here), found that the notional value of derivatives held by US commercial banks rose $804bn in Q309 – or 0.4% – to $204.3trn.
Derivative contracts remained concentrated in interest rate products, which accounted for 84% of total derivative notional values. Credit default swaps (CDS) accounted for 98% of total credit derivatives, representing the dominant p0roduct.
As a sign the financial market has returned to a more normal environment, the OCC said banks reported trading revenues 11% greater than the previous quarter — reaching $5.7bn in Q309.
"As noted in previous quarterly reports, changes in the value of derivatives payables and receivables have had an impact on trading revenues," the OCC said in its report. "During the third quarter, amid signs that the US economy was stabilizing and capital market conditions improving, credit spreads narrowed."
OCC added: "The net effect of changes to the fair values of derivatives payables and receivables, which are part of trading revenues, was positive during the third quarter, but less significant than in the second quarter."
Write to Diana Golobay.
The US Treasury Department added 11 new servicers to the Home Affordable Modification Program (HAMP), pushing the total number of participants to 99, according to the latest Troubled Asset Relief Program (TARP) transaction report.
Under HAMP, the Treasury allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. Currently, the 99 servicers could receive a potential $27.4bn in capped incentives, but the Treasury plans to spend $50bn on the program.
Of the new servicers, Ohio-based First Federal Savings and Loan Association of Lakewood received the highest cap at $3.4m. Park View Federal Savings Bank, also based in Ohio, receives a $760,000 cap. The third highest belongs to Indiana-based Horizon Bank, which receives a $700,000 cap.
Hartford Savings Bank, based in Wisconsin, receives a $630,000 cap. The Illinois-based Citizens 1st National Bank receives a $620,000 cap. Verity Credit Union, based in Seattle, Washington, receives a $600,000 capped incentive.
Also based in Seattle, Sound Community Bank receives a $440,000 cap. Glenview State Bank, in Illinois, receives a $370,000 capped incentive, and HomeStar Bank & Financial Services, also based in Illinois, gets a $310,000 cap.
Golden Plains Credit Union, in Kansas, receives a $170,000 capped incentive, and the Bryn Mawr Trust Co., based in Pennsylvania, receives a $150,000.
Earlier in December, the Treasury reported 30,000 permanent modifications through HAMP, but the Treasury anticipates 375,000 permanent workouts by the end of the year.
Write to Jon Prior.
The $6,500 homebuyer tax credit is getting existing homeowners off the fence and to the closing table, according to a Campbell Communications monthly survey of real estate market conditions.
Existing homeowners accounted for 41% of home purchase transactions in November, up from 38% in October. First-time homebuyers decreased from 47% in October to 45% in November, and investors’ share of activity declined 1% to 14% in November.
“Our survey statistics are showing the effect of Congress’s delay in extending the homebuyer tax credit and then its eventual extension,” said the study’s research director, Thomas Popik. “The first-time homebuyers started to lose interest in October when it appeared that Congress wouldn’t extend the credit. When the credit was finally extended in early November, current homeowners jumped at the new opportunity for a tax credit on their home purchases.”
Activity in the non-distressed market also increased. The share of non-distressed houses purchased jumped from 58% in October to 63% in November. Existing homeowners tend to purchase non-distressed properties, the firm said.
The market report is a survey of 1,500 real estate agents across the US.
Write to Austin Kilgore.
Existing home sales volumes are down 30% from their mid-decade peak and are now at 1998 levels, according to John Burns Real Estate Consulting (JBREC). Of all the variables graded for the overall report, housing supply scored an F due to the oversupplied nature of the market.
As HousingWire previously reported, while the decline is significant, it could be worse, the firm said. Sales volume is “propped up” by government intervention — the homebuyer tax credit, high volumes of Federal Housing Administration (FHA)-insured mortgages, Freddie Mac (FRE: 0.00 N/A) and Fannie Mae (FNM: 0.00 N/A) bailout, and Federal Reserve's mortgage rate intervention — and investor purchases exceed 2005 levels as a percentage of total activity.
“In other words, there would be far fewer home buyers today (just as there was in 1968-70, 1973-75, 1981-83 and 1990-92) and house prices would be falling even further,” company president John Burns wrote.
Despite the decline from records previously reached this decade, resale transactions are at a rate of 4.4 per 100 households, higher than the historical norm of 3.9 transactions per 100 households.
Burns advised the real estate industry to watch for regulatory changes that could come with the approval of pending legislation, affecting everything from down payment requirements, FICO scores, insurance premiums, limits on certain types of buildings, dollar limits and limits on costs that can be paid by the seller.
“Therefore, if you run a business that is tied to housing, pay far more attention than usual to what is going on in Washington DC as it is likely to determine the health of your business in 2010,” Burns added.
The firm graded a number of economic factors that contribute to the housing market. There’s an oversupply of homes nationally and the JBREC gave the sector a grade of F. Housing completions improved month-over-month, but are still off 25% year-over-year.
“Although vacancy rates in the US have improved in recent quarters, the majority of the US remains oversupplied compared to history. Just four states in the US are currently undersupplied – Texas, Louisiana, West Virginia and Iowa,” Burns said.
Economic growth scored a D, as the economy remains weak despite modest improvements. The Q309 gross domestic product increased 2.8% from Q209, the first quarter-over-quarter increase in a year, but is coming off “very low numbers.” Fewer people are losing their jobs, but 4.7m jobs were lost over the last year, a decline of 3.4% in total workforce payroll.
Housing affordability got a C-. With low prices and mortgage rates, the housing cost-to-income ratio is at 26.1%, JBREC said, the lowest since 1981. The national homeownership costs are now $54 more expensive per month than renting the average apartment, and in some markets, is even lower. But household income has fallen 4% year-over-year and now averages at $53,293.
The existing home market continues to improve and received a grade of C-. Sales numbers have improved due to the homebuyer tax credit, but the national median prices fell another 7% year-over-year in October. JBREC noted a slower rate of decline in the Standard & Poor’s (S&P)/Case-Shiller national home price index. While the index is down nearly 9% year-over-year, that’s better than the 19% decline in Q109.
The new home market is in flux and got a grade of D. Builder confidence declined in December, but sales volume picked up in the fall compared to last year. In addition, the median single-family new home price increased to $212,200 in October month-over-month but declined 0.5% year-over-year. Unsold home inventory decreased to 6.7 months, down from 7.4 months in November, “a large improvement compared to 12.5 months of supply in the beginning of 2009,” John Burns wrote.
Leading indicators received a grade of C-, as indices of future economic growth have declined slightly. In October, the Leading Economic Index six-month growth rate declined to 10.2%, but remains one of the largest year-over-year growth rates in the index’s 26-year history. Another gauge of future economic growth, the Economic Cycle Research Institute (ECRI) Leading Index, declined to 23%, but is one of the largest growth rates since that survey began in 1968. Other leading indicator indices point to improvement in the stock market, homebuilding, bond investment market and CEO confidence.
Write to Austin Kilgore.
The author held no relevant investments.
The recent UK housing survey from the Royal Institution of Chartered Surveyors is pointing again to the trend of rising housing prices across Great Britain. While encouraging news yet again, some experts remain dubious on the long-term prospects of sustaining this recovery.
Like the US, the UK is dependent on a mix of low unemployment and high housing demand to fuel its on-the-street economic health. Indeed, the same holds true for most of Europe, concludes a recent study from the International Real Estate Business School at the University of Regensburg in Germany. In Britain, for example, commercial real estate is doing relatively well, with a few big sales in central London in December and a few more said to be in the pipeline, but such news remains a small driver of overall investor confidence.
For the six-month straight, the November RICS report sees little negative effect with increasing residential supply the housing market: "demand is still outstripping supply with 28 percent more surveyors stating that enquiries from potential purchasers are rising rather than falling."
A net balance of 35 percent of Chartered Surveyors agreed that prices were rising, up from 34 percent in October. Transaction levels remained broadly constant with sales per surveying firm hovering around 19 over the past three months. But with the inventory of property on the market falling, the closely watched sales to stock ratio – a measure of market slack and a lead indicator of future prices- has climbed a little further. It has now risen for the past 12 months and stands at 31 percent.
However, Richard Sexton director of business development at e.surv Chartered Surveyors, the largest distributor of valuation instructions in the UK, believes that though the market survey shows signs of encouragement, there is still a very real possibility that sales and prices will fall back in the first half of 2010.
"With the continuing lag in supply, shown by the first slip of inventory of property on the market seen in five months, the effect will surely be seen in the coming months," he said, adding that regional developments can not be extrapolated to the larger UK market.
"London is and has for some time been a separate market from rest of UK, with prices rising at a disproportionate rate and new buyer enquiries remaining strong. Overall we see a single figure rise in values across the UK as likely for 2010, but this will not be a straight line performance’
For its part, the RICS survey is clear that while prices and sales are strong in the UK, anecdotal evidence of a terrible time for other aspects of the economy, such as employment and retail, suggest that housing should not be doing as well as it is.
The RICS remain bullish, though, saying buyer interest in the residential market is set to hit a mini-boom in the New Year.
Write to Jacob Gaffney.
As HousingWire reported over the weekend, private mortgage insurance firm PMI Mortgage Insurance Co., of PMI Group (PMI: 0.00 N/A), does not expect an additional downturn in the US economy in the New Year, and even projects a "moderate" pace of growth in 2010.
"If this is correct, and we think it is, then the recession has ended and the unprecedented amount of liquidity that the Federal Reserve has added to the economy in order to spur an expansion won't be needed," PMI said in a market outlook report (available to download here).
PMI economists added: "If fact, the longer the Fed keeps the surge in liquidity in place in the face of an expanding economy, the greater the chance that rising inflation and asset bubbles will result."
PMI expects the Fed to remove its liquidity through allowing special facilities to run down and raising the federal funds rate. Despite the Fed's exit from liquidity efforts, the housing market looks poised to post some moderate recovery in the new year after finishing 2009 on mixed results.
PMI projects existing home sales to rise 3.7% at the end of 2009. New home sales should decline 19.4% for the year, economists said, as buyer demand continues to work through substantial foreclosure inventory. An oversupply of homes also continues to weigh on prices, bringing the median existing home price down by 12.6% in 2009.
But next year may see some positive growth, PMI said. Continued high affordability will spur increases in home sales over the course of 2010, despite a slow-down after the expiration of the expanded first time homebuyer tax credit in April. Sales should rise more strongly in 2010 as the job market improves. PMI expects existing home sales to climb by 8.8% and new home sales by 29.2%.
Write to Diana Golobay.
A look at the stories on HousingWire’s weekend desk…with more coverage to come on bigger issues:
According to John Burns Real Estate Consulting, existing home sales volumes are off 30% from the peak and have returned to 1998 levels.
Perhaps even more worrying, the research states that existing sales volumes are driven by government initiatives, such as the expanded tax credit, aggressive FHA lending, Freddie and Fannie bailout, and Fed mortgage rate intervention. Additionally, investor activity now exceeds 2005 levels as a percent of total activity.
"In other words, there would be far fewer home buyers today (just as there was in 1968-70, 1973-75, 1981-83 and 1990-92) and house prices would be falling even further," states the research. "Therefore, if you run a business that is tied to housing, pay far more attention than usual to what is going on in Washington D.C. as it is likely to determine the health of your business in 2010."
In other research, PMI does not expect an additional downturn in the US economy in the New Year:
Real GDP growth was revised downward a bit to 2.8% for the third quarter (about where we projected it two months ago). Beyond this, however, most of the economic news was supportive of faster growth going forward. The job market in particular, while still declining, appears poised to start growing again soon. Ultimately, it will be job growth that will allow the recovery to unfold without government assistance, and to allow households to increase both savings and spending – necessary ingredients for a sustained and healthy economic expansion. Additionally, it appears as if the large inventory cuts by businesses may be done – which suggests that production will rise further in coming months.
More from HousingWire to come today… so check back regularly.
The Federal Deposit Insurance Corporation (FDIC) created a 'bridge bank' to take over the operations of Independent Bankers' Bank of Springfield, Illinois, after the bank was closed at close of business Friday by the Illinois Department of Financial and Professional Regulation—Division of Banking.
The newly created bank, which is a federally-run entity in which the government assumes the assets and liabilities (in this case, $585.5m in assets and $511.5m in deposits) of the receivership will be called Independent Bankers' Bank Bridge Bank, National Association.
The FDIC explains the decision: "The creation of the bridge bank allows the client banks to maintain their correspondent banking relationship with the least amount of disruption."
The same holds true for customers of the much larger Imperial Capital Bank of La Jolla, California, They will see their branches open as City National Bank which will assume the failed bank's $4bn in total assets and $2.8bn in total deposits.
In addition, federal regulators closed another five banks, rounding out the total to 140 for 2009.
This morning, customers of the First Federal Bank of California will see their branches open as OneWest Bank which will assume the failed bank's $6.1bn in total assets and $4.5bn in total deposits. OneWest is also suspending foreclosures until January 4, 2009, in unrelated news.
New South Federal Savings Bank of Alabama, was closed today by the Office of Thrift Supervision. To protect the depositors, the FDIC entered into a purchase and assumption agreement for $1.5bn in total assets and $1.2bn in total deposits with Beal Bank of Plano, Texas.
In a similar arrangement, Peoples First Community Bank, of Florida is being taken over by Hancock Bank of Mississippi, in order to assume its $1.8bn in total assets and $1.7bn in deposits.
Rockbridge Commercial Bank of Atlanta also closed with $294m in total assets and $291.7m in total deposits. The FDIC could not source an interested take over partner, and will so start paying out deposits in due time, once reviewed to insure an individuals deposit does not exceed the $250,000 insured limit. "Customers who placed money with brokers should contact them directly for more information about the status of their funds," the FDIC states.
Finally, Huntington National Bank took over operation of Citizens State Bank of MI and its $168.6m in assets and $157.1m and deposits.
