Friday, January 30, 2009
Understanding the "Good Bank", "Bad Bank" Strategy
If it doesn't load immediately once you're on the CNN Money page, just click on the photo that shows the CitiBank Logo titled "Caution: Bad Banks Ahead"
Misery Index Uncovers REO Opportunities
But it's not all gloom and doom...This report shows that many states have very low foreclosure rates which is a strong indicator that home values are somewhat stable in those areas. If you are able to secure discounted REO product in those geographic areas there is a better chance that these properties can be sold at or near retail levels.
Work with your Bulk REO buyers and sellers to encourage them to seek out some of the less sought after areas of the United States. I'm confident they will find the deals easier to close and the pricing much more competitive.
Thursday, January 29, 2009
Home Prices Continue To Decline 2% per month - REO Buyers/Sellers Pay Attention!
See my blog from January 16, 2009:
Prepare Yourself For Further Declines In Home Values
Home Prices Continue to Slide
January 27, 2009
House prices fell by another 2.2% in November for the second consecutive month and prices are off by 18.2% over the previous 12 months, according to the Standard & Poor's/Case-Shiller housing price index that tracks home sales in 20 major metropolitan areas. Since the peak in August 2006, prices have fallen 25% and the "freefall" continued in November, according to David Blitzer, chairman of S&P's index committee. Average house prices are now back to first-quarter 2004 levels. "The main force driving down house prices is foreclosures, which are still rising," IHS Global Insight economist Patrick Newport said. He expects house prices will continue to decline over the first half of this year.
Wait Before You Buy A New Car
Wednesday, January 28, 2009
Costs Associated With Remodeling.
With a move toward smaller, more viable REO transactions this information regarding the costs associated with remodeling properties might prove to be very useful to your clients with a fix/flip, fix/rent strategy. Be sure to click on your particular state/region as the costs are not universal throughout the country.
Fix Housing First Homebuyer Tax Credit - Senate Bill 253
Florida REO's - Make Sure You Have Insurance
As if Florida hasn't been punished enough...High foreclosure rate, Hurricanes etc. Now it's becoming even harder to get homeowners insurance in that state. State Farm, Florida's second largest insurer is pulling out of Florida after having their bid for a 47% rate increase rejected. Citizens Property Insurance Corp. the state created insurer and the largest insurer in the state has been trying to reduce the number of policies it insures.
What does this mean?
- premiums will go up as policies are shifted to smaller insurance companies
- concerns that the smaller companies will not be able to withstand the claims if a large-scale disaster occurs
- REO buyers can expect increased holding costs and lower bids for Florida properties.
Cramdown Clears House Panel - But There's a Catch!
- lender could recoup losses if property is sold within 4 years of cramdown
- bankruptcy protection would not apply if borrower committed fraud or misrepresented themselves
- the bill is likely to change before it is finalized.
- If the homeowner must stay in the home for 4 years then the cramdown cannot be used to bring the sales price down to market rate in an effort to sell. It also means that once the cramdown value has been established, the homeowner is not protected if the market continues to drop over the 4 year period.
- THIS IS VERY IMPORTANT: expect lenders to be very diligent in reviewing the INITIAL LOAN APPLICATION to look for any fraud or misrepresentations i.e. "stated" income loans in which the income was inflated to qualify. This would make the homeowner ineligible for the cramdown and could make put them at risk for further legal action.
- We must continue to stay aware of the progress made on this bill. Much like the current bailout bill, the final draft was more than 500 pages larger than the initial bill and included many unrelated issues. I think we can expect the same for this bill.
Tuesday, January 27, 2009
Bankruptcy Cramdown....Read The Fine Print
- All loss mitigation options will need to be "exhausted before cramdown would be allowed
- Limiting cramdowns to only subprime loans originated during the real estate boom
- Only providing cramdown relief on a temporary basis
- 66% of bankruptcy repayment plans fail
MBA: Cramdown Supporters Gaining Momentum
January 26, 2009
While remaining steadfast in their opposition to "cramdowns," the Mortgage Bankers Association acknowledges that supporters are gaining momentum and the trade group has outlined parameters it would like to see included in legislation that would allow bankruptcy judges to reduce the secured portion of a mortgage loan. In a conference call with reporters, MBA representatives said a bill that allows bankruptcy judges to alter the contractual terms of a mortgage should limit the discretion judges have to reduce principal, lower rates or extend terms on a mortgage. MBA chairman David Kittle said that if Congress does go this route, cramdowns should only be allowed after a "waterfall" of other loss mitigation options have been exhausted, including repayment plans, loan modifications, an extension of terms and principal deferral. He also proposed that cramdowns be limited to subprime loans originated during the peak of the housing boom and that cramdown relief should be temporary. "We need to set a permanent sunset date after which judges will no longer have this extraordinary power to alter the terms of a mortgage," Mr. Kittle said, noting that two thirds of bankruptcy repayment plans fail, in which case the borrower typically loses their home to foreclosure anyway. Steve O'Connor, MBA's senior vice president of government affairs, acknowledged that "clearly there is political momentum" favoring supporters of cramdown relief. "We recognize the realities of the landscape. And if in fact cramdowns are implemented, we think there should be some constraints to limit damage to the marketplace."
Monday, January 26, 2009
2008 FORECLOSURE DATA
States ranked by 2008 foreclosure rates
Rank | State | Total Foreclosure Filings | Total Properties with Filings | % chg. from 2007 | % chg. from 2006 | % Housing Units (foreclosure rate) |
1 | 123,989 | 77,693 | 125.74 | 529.5 | 7.29 | |
2 | 501,396 | 385,309 | 133.11 | 411.68 | 4.52 | |
3 | 152,621 | 116,911 | 203.13 | 655.04 | 4.49 | |
4 | 837,665 | 523,624 | 109.86 | 497.91 | 3.97 | |
5 | 66,795 | 50,396 | 27.9 | 61.41 | 2.41 | |
6 | 145,365 | 106,058 | 21.61 | 107.89 | 2.35 | |
7 | 146,099 | 113,570 | 26.22 | 155.4 | 2.25 | |
8 | 116,225 | 85,254 | 44.36 | 117.07 | 2.2 | |
9 | 115,063 | 99,488 | 54.7 | 126.01 | 1.91 | |
10 | 69,612 | 62,514 | 101.2 | 186.84 | 1.8 | |
11 | 61,141 | 45,937 | 64.18 | 113.59 | 1.67 | |
12 | 51,496 | 44,153 | 70.38 | 127.87 | 1.65 | |
13 | 18,657 | 14,836 | 99.46 | 68.25 | 1.65 | |
14 | 53,797 | 44,342 | 150 | 577.08 | 1.64 | |
15 | 25,510 | 21,925 | 84.87 | 570.49 | 1.53 | |
16 | 67,695 | 49,011 | 200.55 | 1746.68* | 1.52 | |
17 | 7,334 | 6,583 | 258.16* | 1525.43* | 1.46 | |
18 | 41,582 | 32,338 | 71.29 | 945.18 | 1.41 | |
19 | 11,272 | 8,512 | 133.85 | 302.08 | 1.38 | |
20 | 42,054 | 31,254 | 33.04 | 139.11 | 1.19 | |
21 | 25,049 | 18,001 | 112.75 | 168.67 | 1.13 | |
22 | 8,018 | 6,636 | 436.03* | 5430.00* | 1.13 | |
23 | 16,611 | 14,277 | 122.87 | 198.06 | 1.12 | |
24 | 129,201 | 96,157 | 13.84 | 14.96 | 1.04 | |
25 | 32,271 | 26,058 | 71.61 | 116.64 | 0.97 | |
26 | 23,716 | 20,282 | 75.5 | 336.74 | 0.89 | |
27 | 41,750 | 33,819 | 16.21 | 153.14 | 0.84 | |
28 | 25,164 | 19,695 | 62.33 | 249.02 | 0.78 | |
29 | 16,059 | 12,465 | 50.98 | 32.86 | 0.78 | |
30 | 16,136 | 14,995 | 253.07* | 220.41* | 0.76 | |
31 | 2,265 | 1,946 | 46.1 | 96.76 | 0.7 | |
32 | 42,949 | 37,210 | 127.18 | 68.88 | 0.68 | |
33 | 2,998 | 2,516 | 151.85* | 701.27* | 0.66 | |
34 | 3,346 | 3,185 | 229.71 | 489.81 | 0.64 | |
35 | 55,641 | 50,032 | 29.32 | 129.23 | 0.63 | |
36 | 7,983 | 6,218 | 155.46 | 179.96 | 0.51 | |
37 | 4,543 | 3,727 | 24.48 | 38.29 | 0.44 | |
38 | 3,171 | 2,851 | 896.85* | 5602.00* | 0.41 | |
39 | 3,326 | 3,190 | -12.27 | 25.84 | 0.41 | |
40 | 6,405 | 5,385 | 31.25 | 135.77 | 0.41 | |
41 | 7,837 | 7,129 | 79.66 | 111.42 | 0.39 | |
42 | 8,820 | 7,244 | 41.9 | 45.46 | 0.38 | |
43 | 8,436 | 7,764 | 39.34 | 184.19 | 0.37 | |
44 | 1,220 | 1,246 | 8.35 | 32.55 | 0.29 | |
45 | 921 | 677 | 90.17 | 165.49 | 0.28 | |
46 | 2,364 | 2,293 | 62.74 | 181.35 | 0.18 | |
47 | 391 | 371 | 48.4 | 148.99 | 0.12 | |
48 | 405 | 402 | 1575.00* | 793.33* | 0.11 | |
49 | 687 | 685 | 48.91 | 170.75 | 0.08 | |
50 | 124 | 137 | 372.41* | 705.88* | 0.04 | |
| 4,631 | 4,182 | 438.22* | 3245.60* | 1.48 | |
-- | U.S. | 3,157,806 | 2,330,483 | 81.24 | 224.8 | 1.84 |
*Actual increase may not be as high due to data collection changes or improvements | | |
Illegal Foreclosures Could Make "Proof of Product" Mandatory
In my opinion, now more than ever, sellers will need to be prepared to provide, up front, proof of product as evidence of their titled ownership of the assets being offered for sale. If not, they may need to "hold harmless" the buyer from potential liability should clear title not be available.
Fannie Mae is Beefing Up Their Foreclosure Division
Layoffs at Fannie in the 'Hundreds'
January 23, 2009
Fannie Mae, which has been operating under a government conservatorship since September, has laid off hundreds of workers over the past four weeks, according to sources both inside and outside the mortgage investing giant. At press time, a Fannie Mae source confirmed that "hundreds" of layoffs have occurred but said the company is beefing up its foreclosure and loss mitigation efforts -- particularly in its Dallas office -- and hopes to end 2009 with as many employees as it had in 2008. The GSE issued a statement saying it is "taking steps to realign the company's organization, personnel and resources to focus on our most critical priorities, which include preventing foreclosures to help keep people in their homes and aiding in the recovery." Among the known job cuts, said one individual, are reductions in government affairs, communications, marketing, and technology. "They can't lobby any more so what's the point in having a government affairs division?" said the individual. Freddie Mac also has been quietly laying of workers with more cuts on the way, said one mortgage executive close to the company. "This shouldn't be surprising to anyone," he said.
U. S. Financial Crisis makes the GAO High Risk List
These are both fairly extensive reports and are best read when you can dedicate the time to absorb all of the information.
Financial Crisis Causes Icelands Government to Collapse
Saturday, January 24, 2009
Impending New Wave of Foreclosures
Although I've been talking about this for over a year, it looks like the news media understands the impact of the impending recast or reset of Pay-Option ARMs. It's worth it to watch the entire video. I learned that despite the "foreclosure moratorium" there is a Florida company that is evicting as many as 20 homeowners every day on behalf of the banks with that number growing rapidly.
Friday, January 16, 2009
Prepare Yourself For Further Declines In Home Values
PMI Sees Broader Risk of Further Home Price Drops
January 14, 2009
A quarterly index that attempts to quantify the risk that housing prices will deteriorate over the next two years finds that the likelihood of further home value declines has broadened. The index, created by mortgage insurer PMI, shows the risk of price declines rose in 369 of the 381 metropolitan areas tracked in the survey. PMI estimates that half of the nation's 50 largest metropolitan areas have an "elevated or high" risk of seeing home prices fall further. And a growing number of cities in the industrial Midwest and the East Coast show an increase in the probability that home values will be lower in two years, PMI said. David Berson, PMI's chief economist and strategist, said that "the continued high level of foreclosures and rising unemployment" continue to put downward pressure on home values.
CA Notices of Default Almost Double in Month
CA Notices of Default Almost Double in Month
January 14, 2009
ForeclosureRadar has issued its California Foreclosure Report for December 2008 and year-end summary, noting that notices of default have rebounded from the stall caused by California State Senate Bill 1137, which it said temporarily slowed foreclosures by imposing new requirements on lenders. The Discovery Bay, Calif.-based website, says with 42,421 filings in December, notices of default are back to the record levels reached in the second quarter of 2008, nearly doubling the 21,557 notices recorded in November. In 2008, California saw 249,940 foreclosure properties sold at trustee sale auction, representing $107.8 billion in combined loan value. Of those properties 96.4% went back to the lender after no bid was received from a third party. For the year, there were a total of 437,955 notices of default filed, an increase of 56% over the 279,821 filed in 2007. Notice of trustee sale filings increased 122.9% over 2007 rising from 157,273 filings in 2007 to 350,514 filings in 2008. Properties sold at auction increased by 158% by volume, and 179% by combined loan value. Lenders took back a total of 241,093 properties, with a combined loan value of $103.9 billion, the report said. "While a number of lenders have announced significant loan modification programs to reduce payments to affordable levels, these plans fail to address the fact that the average foreclosure in California now has $180,000 in negative equity," said Sean O'Toole, founder of ForeclosureRadar.
Thursday, January 15, 2009
Fannie Mae tests 'short sale' program / Works with renters
Wednesday, January 14, 2009
Staggering Projection! 13 Million Foreclosures by 2013
Potential solutions include:
1. bankruptcy reform
2. an FDIC plan to create monetary incentives to mortgage servicers for loan modifications
3. eliminating restrictions that would make the FHA "Hope For Homeowners" program a more viable solution
4. raising loan limits to allow more properties to qualify for conforming loans
5. tax incentives
6. lowering interest rates
I believe it will take a reasonable combination of all these solutions in order to avert further disaster in the housing market. Those of us in the REO industry should watch very closely as this will signal a turnaround and cause us to redesign our acquisition and exit strategies.
Tuesday, January 13, 2009
Understanding the New Credit Scoring Model
Friday, January 9, 2009
Make sure you have appropriate Disaster Insurance Coverage
Increased Pressure on Fed to Assist Homeowners
Robin S. Reed
JMO-Just My Opinion
ProEquity Management, LLC
robin@proequitymanagement.com
480-242-1952
Wednesday, January 7, 2009
Bill introduced that would allow primary residences to be included in bankruptcy
This was offered by Peter Bourget. Thanks Peter!
Durban Introduces 'Cramdown' Bill
January 6, 2009
Sen. Dick Durbin, D-Ill., has introduced a bill that would allow bankruptcy judges to modify mortgages on primary residences and he is working to include it in the economic stimulus package. The Senate assistant majority leader said Congress has already committed over $1 trillion to address the financial crisis. "Why don't we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?" Sen. Durbin asked. The Financial Services Roundtable said the Durbin bill and a similar measure introduced by Rep. John Conyers, D- Mich., in the House would be "counter-productive" and encourage bankruptcies. "They will inject additional risk into home buying and the markets will respond by increasing interest rates, fees, downpayments, or all three," FSR president and chief executive Steve Bartlett said.
IRS Offering to waive late penalties
IRS waiving late fees,
JMO 1/7/08 - economic outlook, Fannie/Freddie as Utility
For those of you who have followed JMO for a while you know that our purpose is to provide news and information regarding the economy as it relates to or impacts the REO, Real Estate and Mortgage industries. Nowadays, it seems like everything impact these industries. What I've begun to look for is "a plan", some indication that the powers-that-be are doing more than chasing this economic crisis. I firmly believe we need to make big moves to get in front of this problem and stop it. This won't happen overnight, no matter how much money you throw at it.
One Fed Chairman said the economic outlook is grim(link) . He is concerned not only of how we provide financial assistance to fund a stimulus package, but also the timing that is involved in properly withdrawing such assistance and returning our economy to self-sufficiency.
Treasury Secretary Paulson recommends turning Fannie/Freddie into a utility-like (link), company that acts as a guarantor of mortgages, but does not hold an investment portfolio as they have in the past. The concern with this is where would banks and wholesale lenders sell off their loans and this would virtually eliminate the secondary market. Such a move would further impact the banks liquidity if they were required to hold and service more of the loans they originated.
Clearly, a much needed change is coming. Hopefully this will be change for the long term benefit of our economy.
Robin S. Reed
JMO-Just My Opinion
ProEquity Management, LLC
robin@proequitymanagement.com
480-242-1952
Welcome to the JMO BLOG
I decided to convert the JMO Newsletter into in a blog in an effort to get information out in a more timely manner. The blog will also allow our readers to contribute and participate with ideas and information. I look forward to hearing from you.
Regards
Robin S. Reed
JMO-Just My Opion
ProEquity Management, LLC