Short Sales

A few years ago, few people in the housing market had ever heard of a short sale. Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.

The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn’t ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale. 

In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages. Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks. 

Read more: http://rismedia.com/2009-09-26/short-sales-spread-across-real-estate-market-leaving-frustration-in-their-wake/#ixzz0SMEN3INl

A few years ago, few people in the housing market had ever heard of a short sale. Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.

The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn’t ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale. 

In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages. Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks. 

Read more: http://rismedia.com/2009-09-26/short-sales-spread-across-real-estate-market-leaving-frustration-in-their-wake/#ixzz0SMEN3INl

A few years ago, few people in the housing market had ever heard of a short sale. Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.

The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn’t ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale. 

In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages. Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks. 

Read more: http://rismedia.com/2009-09-26/short-sales-spread-across-real-estate-market-leaving-frustration-in-their-wake/#ixzz0SMEN3INl

A few years ago, few people in the housing market had ever heard of a short sale. Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.

The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn’t ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale. 

In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages. Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks.

Citi….saying see ya…

Citigroup Inc., one of the biggest recipients of government bailout funds, is looking to scale back its U.S. retail footprint to just six major metropolitan areas and limit most lending to wealthy customers, according to a published report.

Citi’s management is looking to reduce the bank’s U.S. consumer lending to mainly credit cards and “jumbo” mortgages, The Wall Street Journal reported Wednesday, citing unnamed people familiar with the situation.

The New York-based bank’s executives are expected in October to present plans to the board of directors to pare Citi’s retail branch network and concentrate mainly on the New York, Washington, D.C., Miami, Chicago, San Francisco and Los Angeles areas, the paper said.

Most of Citi’s branch locations are located internationally. Citi currently operates about 1,000 U.S. branches, much fewer than the 5,000-plus run by Bank of America Corp. and JP Morgan Chase & Co., which expanded its network with the takeover of Washington Mutual last year. While the moves would be designed to help the bank work “smaller-but-smarter,” the paper said some Citi executives are concerned that the U.S. government, which owns a 34 percent stake in Citi, could balk at branch closings.

Citi is looking to sell its 120 branches in Texas and is mulling whether it should continue to maintain a large footprint in cities like Boston and Philadelphia, the paper said. Citi holds few deposits in those locations compared with competitors.

Death Panels are back

Even though Grandma supposedly no longer has to worry about the Obama Administration ‘death panels,’ non-bank financial institutions do. At least, that’s what you might gather if you heard Rep. Barney Frank‘s opening remarks this morning during a House Financial Services Committee hearing. He said — and I do quote — that there will be “death panels for non-bank financial institutions.” Barney was going off on a tangent (somewhat) and later clarified that he was talking about large ‘too big too fail’ institutions such as AIG and Lehman. Supposedly, in a memo that’s floating around Washington, Rep. Frank (when it comes to the Consumer Financial Protection Agency) says he wants depositories and non-banks to be treated equally — and that this supposedly applies to mortgage lenders. Meanwhile, AIG’s stock, once again, is on the rise. It’s at $47 compared to a 52-week low of $6.60 and a high of $114. Since I (and my fellow Americans) own most of AIG, my recommendation is this: sell it, baby!…

Attempting to Pay His Mortgage

“I had to get us out of this,” the elderly man said from the other side of the glass at San Diego central jail. “I’ve never done a bad thing in my life. But when you get desperate, I guess you throw all that sh– out the window.”

Listening to how Michael Casey Wilson of Santee tells it, a 17 percent mortgage, the threat of homelessness and a terminal health condition will turn a man to crime.

Wilson, 69, is accused of walking into the Bank of America branch in the 4100 block of El Cajon Boulevard in City Heights and handing a bank manager a demand note, saying he had a bomb. Prosecutors said he made off with $107,000 before he was caught lying on a front porch near the bank.

“I wrote them an apology. I am so sorry,” he said referring to the employees who rushed out of the bank. “It’s not my purpose in life to scare people.”

“If it would’ve worked the way I wanted it to, it would’ve just been he and I. But he told everybody. He shouldn’t have done that,” Wilson said.

On Thursday he pleaded not guilty to three counts of robbery and one count of falsely reporting a bomb to a business. In an interview Friday, Wilson was very open about the plan he had hatched to save his home.

“I was hoping to get $50,000 to pay off my mortgage,” he said. “Just to get the money and get the hell out of there.”

Wilson said he had planned to hail a taxi and drive with the bank manager to the airport. Once the manager was gone, Wilson said he had hoped to pick up another taxi to take him to his home in Santee. But he said he never thought the bank manager “had the balls to call the police.”

“I saw all of a sudden all the people rushing out and I knew I was had,” he said. “I knew that he had called me in. C’est la vie.”

Wilson said he lives with his 73-year old wife, who he described as a “gentle soul.” He said he feared for her future living on the streets if he couldn’t make their house payment.

Looking at Wilson, you can see his health is suffering. He claims doctors have diagnosed him with severe arthritis, sleep apnea, heart problems, and a disease he described as one “that makes you fly off the handle.” Wilson said he was told he had one to two years to live.

When he hatched the bank robbery plan, he said that he had considered the consequences but thought, “It was 50-50. Well if I get caught, I get caught. I’m dying anyway so what different does it make.”

Wilson could face more than seven years in prison if he is convicted. His bail was set at $50,000.

“Let’s face it,” he said. “Here’s a man who (screwed) up his life and his family’s life but I did it with good intentions. Just stupid intentions.”

MBS & Wall St.

The anchor/pundits on CNBC (Larry Kudlow I’m talking about you) and other TV business shows have been blathering on all week about how the government needs to wean itself from not only Fannie and Freddie but the mortgage market in general. I got news for you, Larry: the private label MBS market ain’t coming back any time soon and when it does it will be for low LTV jumbo mortgages with high FICO scores. Wall Street will never again securitize subprime loans unless there is some type of government backing on them or tons of mortgage insurance or something similar.

Market Review…last week

Investor sentiment about the economic recovery fell last week, and the stock market declined. Expectations for slower economic growth are favorable for bond markets, including mortgage-backed securities (MBS), and mortgage rates ended the week a little lower.

The important monthly Employment report showed mixed results. Against a consensus forecast for a loss of -225K jobs in August, the economy lost -216K jobs. This was the smallest level of monthly job losses since August 2008 and was far below the monthly average of -691K seen during the first quarter of the year. The biggest surprise in the data came from the Unemployment Rate, which jumped from 9.4% to 9.7%, the highest level since 1983. The unexpected increase was mostly due to previously discouraged workers returning to the labor pool to look for jobs. Average Hourly Earnings, a proxy for wage growth, rose at a moderate 2.6% annual rate.

The future of Fannie Mae and Freddie Mac made the headlines this week when the Mortgage Bankers Association (MBA) released its restructuring proposal. While the MBA suggested the elimination of the two agencies, it would replace them with new entities which would perform many of the same functions, with many of the same people. Its plan would maintain a government guarantee of principal and interest for MBS investors. The two agencies have played a pivotal role in keeping mortgage rates low and in expanding homeownership, and the MBA proposal would retain these benefits. It’s very early in the process, and the Obama administration indicated that its proposals for Fannie and Freddie may not be revealed until early next year.

Treasury auctions may have the greatest impact on mortgage rates this week. There will be $70 billion in 3-yr, 10-yr, and 30-yr auctions on Tuesday, Wednesday, and Thursday. It will be a light week for economic data. The Fed’s Beige Book will be released on Wednesday, and the Trade Balance will come out on Thursday. Import Prices and Consumer Sentiment are scheduled for Friday. Mortgage markets will be closed on Monday for Labor Day.

Extend the 8K Home Buyer Credit

Real estate organization leaders are putting more intensive pressure on legislators to extend and expand the $8,000 first-time home buyer tax credit, now due to expire on December 1. Most industry leaders are calling on Congress to extend the tax credit program to at least November 30, 2010 and make it available to all buyers of homes to be used as their principal residence.

“If Congress acts to extend the tax credit program, it would spur 383,000 additional home sales, including 80,000 housing construction starts. That would create nearly 350,000 jobs over the coming year,” said Joe Robson, chairman of the National Association of Home Builders. “That’s good for the economy and good for America.”

Although there have been signs of economic stabilization in recent weeks, the unemployment rate is approaching double-digits. Without a concerted focus on the housing sector, that comprises more than 15 percent of the GDP, any hope for a recovery could fade, a NAHB report noted. “At best, it looks like a jobless recovery once it gets underway. This is why Congress needs to take bold, meaningful action now,” Robson said. Other major real estate organizations are making similar recommendations.

Positive Real Estate Market

There is no doubt that the real estate market is heading in a much more positive direction. Sales of existing homes, pending sales of existing homes and sales of new construction are all up. The media headlines are now mentioning and, in some cases, are exclaiming that we have reached a bottom. However, let’s not lose track of the real data behind the headlines. Things are better. But, we still have a long way to go. For example, though it is true that new construction sales shot up 11% in June, June has historically always been the best month of the year for this category. And, in actual units delivered, this June was the worst June since 1982! I am not trying to play the role of the pessimist just as I wasn’t playing the role of the optimist this past winter when I said the market wasn’t as bad as the media was reporting. I try to be a realist. What is reality telling me right now? All our hard work over the last twelve months is starting to pay off. Let’s remain diligent in our pricing to ensure we keep the present momentum going

Super-Duper Regulator

The Obama administration has proposed sweeping changes to our financial regulatory system, including the creation of a consumer financial protection agency. Certain adminstration officals are advocating even more drastic changes, like the creation of a single regulator for all banks (and bank holding companies). We clearly need to streamline the system, but a single regulator is not the solution.  The plan fails to identify the real roots of last year’s financial meltdown. The truth is, no regulatory structure — be it a single regulator as in Britain or the multiregulator system we have in the United States — performed well in the crisis.

The principal enablers of our current difficulties were institutions that took on enormous risk by exploiting regulatory gaps between banks and the nonbank shadow financial system, and by using unregulated over-the-counter derivative contracts to develop volatile and potentially dangerous products. Consumers continue to face huge gaps in personal financial protections. We also lack a credible method for closing large financial institutions without inflicting severe collateral damage on the economy.

The creation of a single regulator for all federal- and state-chartered banks would not address these problems. Rather, it would endanger a thriving, 150-year-old banking system that has separate charters for federal and state banks. Within this system, state-chartered institutions tend to be community-oriented and very close to the small businesses and consumers they serve. They provide loans that support economic growth and job creation, especially in rural areas. Main Street banks also are sensitive to market discipline because they know that they’re not too big to fail and that they’ll be closed if they become insolvent.

Concentrating power in a single regulator would inevitably benefit the largest banks and punish community ones. A single regulator’s resources and attention would be focused on the largest banks. This would generate more consolidation in the banking industry at a time when we need to reduce our reliance on large financial institutions and put an end to the idea that certain banks are too big to fail. We need to shift the balance back toward community banking, not toward a system that encourages even more consolidation.

A single-regulator system could also hurt the deposit-insurance system. The Federal Deposit Insurance Corporation currently supervises state banks. The loss of a significant regulatory role would limit its ability to protect depositors by identifying and assessing risks in the financial system.

We can’t put all our eggs in one basket. The risk of weak or misdirected regulation would be increased if power was consolidated in a single federal regulator. We need new mechanisms to achieve consensus positions and rapid responses to financial crises as they develop.

We don’t need — and can’t afford — to depend on one supreme regulator to have sole decision-making authority in times when our entire financial system is in flux.