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April 30, 2007 It's The End Of An Era: Lereah Is Out At NAR
Bubble Meter has the scoop. Here's the full press release. I can't believe it, really. Who will the Realtors possibly get to regale us with tales of how the stars are aligned, how the market has bottomed out, or how unsophisticated it is to pay off your mortgage? I have to give mad kudos to David Lereah Watch for the unrelenting dogging of this most obvious shill for the scam that was the housing bubble. Good riddance to bad rubbish. I'm just amazed he didn't say something like how he wanted to spend more time with his family. ;) Posted at 03:35 PM | TrackBack Mortgage & Loan: Bad Foreclosure Advice From the Pensacola News-Journal: For those clients who face foreclosure, Daniell answers their question with a direct and simple strategy: Do whatever it takes to keep your home. "It's very hard for people to not pay their credit cards, but saving the home is the most important thing," Daniell said. "You can push credit card payments to a later date, and bad credit can be overcome." No, no, no. This is just wrong. You shouldn't fall into the trap of thinking you can blow off one form of debt to service another. It's all going to look bad on your credit report, whether it's a foreclosure, a charge-off, or a bankruptcy, and given the tightening of credit standards, any one of these might hamper your chances of buying another home for a loooooooong time to come. Before you let yourself go deeper into debt, talk to your lender. Many of them are increasingly willing to renegotiate your loan terms to something more favorable, just to keep that revenue coming in. Call the National Foreclosure Prevention Program and see what you can do to keep your head above water. Posted at 01:26 PM | TrackBack Buying & Selling: Flippers Flop As Market Cools Sunday's Associated Press had a marvelous gem chronicling the faltering fortunes of flippers in a cooling market: Jason Beaver, a Sunnyvale, Calif.-based Apple Inc. programmer, got caught up in the talk of the hot housing market from friends who bought multiple homes in Las Vegas and made a killing. His name was drawn in a buyers' lottery in the Solera subdivision and he put $35,300 down on a $353,000 home in February 2004. The community is restricted to people age 55 or older; the 37-year-old Beaver had no intention of moving in. I think these are the people Rob Dawg was talking about when we discussed whether or not to be merciful to f$#ked borrowers. People like Beaver are amazing--they're all about the market when it benefits them, but things suddenly go wrong and they want to sue? The kind of conditions he fell victim to were written on the wall months in advance--if the blogerati could see it, why couldn't they? Because they didn't want to. Because people will start with a belief and selectively look for facts to justify said belief, no matter how crazy. And because of the shortsightedness and selfishness of people like Beaver and specuvestor poster boy Casey Serin, many honest buyers are going to be locked out of the market due to severely restricted credit and tighter loaning standards. I hope people like Casey and Beaver can learn from their mistakes and provide examples to benefit others, but I can't shake the belief that this could have all been averted if they'd paid attention to the warning signs earlier on. Posted at 11:24 AM | TrackBack April 27, 2007 Mortgage & Loan: Foreclosures Rise, Rescue Efforts Continue
I hate to end the week on a downer, but looking around, I see the rising tide of foreclosures nationwide and no sign that it's cresting anytime soon: Delaware, home of credit card companies and tax-free shopping, has posted a 178 percent increase in foreclosures between Q4 2006 and Q1 2007. That is, simply put, unbelievable. Massachusetts governor Deval Patrick is calling his state's epidemic of foreclosures a crisis, and is pushing stronger state legislation to combat predatory lending--even as foreclosures were up 47 percent from last March. There is some good news on the front, however: New York City has set up a >call-in hotline to help distressed homeowners connect with nonprofit groups that will help advise them on getting out of foreclosure and find better refinancing plans. It's not much, but it's better than nothing. ACORN has joined the call of consumer groups that want a moratorium on foreclosures: Among the major points of the ACORN campaign is a proposal to state attorneys general to seek injunctions to stop foreclosure proceedings caused by predatory loans. The plan also calls for tougher laws against predatory lending. The group says predatory lending has lead to an epidemic of foreclosures. Last year there were 1.2 million foreclosure filings, a large increase from the 900,000 foreclosures that were filed in 2005. This year, foreclosure filings are expected to reach 1.5 million. It's terrifying to think about statistics like that, but I'm heartened by the response to the foreclosure tsunami. Maybe this really is a watershed in our thinking about real estate, and the laws that will come from this crisis will make lending safer and more responsible for all concerned.
Posted at 11:53 AM | TrackBack April 25, 2007 Buying & Selling: "Due Diligence" In Home Buying
Not long ago, the legendary Marinite asked a bunch of us bubble and housing bloggers this question: What constitutes "due diligence" in home buying? What kind of research is necessary to make the deal? What avenues should you pursue to make sure you're not saddled with a lemon? Here are some basic tips I'd recommend: * Get as accurate a valuation of the property as possible. Many home sellers let ego and social conditioning push them to list their home at the highest price possible, regardless of the local market or national housing conditions. There are numerous market valuation tools available to give you a decent picture of what the home is really worth, and what kind of an offer or counter you can make. In addition to the many Open MLS sites out there, there's Zillow, Ziprealty, HomeGain, etc. * Investigate the property's history. This is where the REAL due diligence comes in--hire a lawyer to look into the property, find out if it's distressed, foreclosed, if it has claims, etc. This 2003 New York Times article explains the process in more detail. * Know your loan potential. Find out what you can qualify for before you sign any papers. Consumers who let themselves be talked into a "creative" mortgage product that trapped them in a mortgage well beyond their years are regretting it now. Terri Cullen discussed this in a good Real Estate Journal article from 2005. * Check up on any potential real estate broker, realtor, or agent you use. It shouldn't take are-reading of Freakonomics to remind you that your transaction agents aren't always acting in your best interest. Investigate the agent's reputation. Find out what transactions they've closed and how they performed. How long have they been in the business? Are they part-time or full-time? Are they licensed? So on and so forth. All it takes is one unscrupulous broker to muck the whole process up permanently. Here are some more resources to help you through the process of due diligence in your home purchase: eBay Residential Real Estate Buying Guide Ten Tips For Home Buying And Selling Posted at 11:20 AM | TrackBack April 22, 2007 Buying & Selling: Buying A Home In Foreclosure
ConsumerAffairs.Com, which has done masterful work in covering the many stages of the housing collapse, has an article today on buying a home in foreclosure. Author Fred Yager walks you through all the steps you need to buy a property on the auction chopping block. It's by no means a cakewalk, as Yager notes: [F]oreclosure homes are sold "as is" which means that the 25 percent you just saved on the purchase price can easily be eaten up by unforeseen expenses such as repairs not immediately apparent in an exterior inspection. That's because when you buy a home in foreclosure, you may not be able to look inside let alone have an inspector detect structural problems that you'll need to fix before moving in...be prepared to pay for any problems such as electrical or plumbing repairs, leaky roofs, or even vandalism by angry homeowners who break things or punch holes in walls and doors, an unacceptable but not that uncommon way that some homeowners deal with the angst of losing their home to foreclosure. A lot of bloggers and specuvestors alike crow about the ease of picking up foreclosed properties, especially now as delinquencies and foreclosures are reaching record levels all over the country. Yager's article is a good bit of cold water in the face on that score. Yager previously wrote about what to do if you find yourself on the other side of the foreclosure gun, which I also recommend. Posted at 06:08 PM | TrackBack April 19, 2007 Mortgage & Loan: High Court Gives Gift To Predatory Lenders
Friend to the consumer? There's been a lot of righteous fury hurled at the Supreme Court for its decision to uphold the ban on partial birth abortions, but another decision came down the wire yesterday that could have even worse consequences. The Court also ruled that operating subsidiaries of major banks--such as mortgage companies--were beyond the reach of state law: The regulation that the court upheld pre-empts state regulation of any banking activity that a national bank conducts through an operating subsidiary. The decision therefore presumably applies beyond mortgage lending to other activities that subsidiaries commonly engage in, like the sale of annuities, automobile loans, small-business lending and investment advice. What this essentially means is that if a mortgage lender uses predatory tactics to nail homebuyers with high-interest loans and bad terms, they're protected from oversight by state law, and governed only by federal law--which, thanks to the influence of big lobbying money--is almost invariably weaker and more gutless. The timing of this decision could not possibly be worse--now, more than ever, we need strong state laws that address the unique issues each state's mortgage climate must face. This isn't something that can be handled from Washington any more adeptly than it has on Wall Street. More about the decision here. I never thought I'd see the day when I supported that smirking chimp John Roberts on anything, but his dissent is one I agree with. What a cluster-foulup. Posted at 04:48 PM | TrackBack April 18, 2007 Mortgage & Loan: Foreclosure Fight Forward!
The news that foreclosure in California is reaching record highs is the latest volley in the war between the merciless entropy that is the housing slump and homeowners' desire to hang in no matter what the cost. For a while there, it seemed like most of the folks who made the mistake of buying too much home with too little money would be left to twist in the wind. But as with all previous bubbles, some genius finally realized that this will threaten the bottom line of many prominent financial institutions, and as such, the forces of finance are stepping up to offer favorable terms for owners on the verge of delinquency: The agencies advised lenders that prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrower...Examples of constructive workout arrangements include modifying loan terms, and/or moving borrowers from variable-rate loans to fixed-rate loans. Bank and thrift programs that transition low- or moderate-income homeowners from higher-cost loans to lower-cost loans may also receive favorable consideration under the Community Reinvestment Act (CRA), provided the loans are made in a safe and sound manner. No less than Fannie Mae and Freddie Mac have stepped up and offered their own products to help people stay in their homes. My one caveat is that simply extending the "teaser" period for an ARM is like giving a cancer patient morphine rather than chemo--it may hurt less, but it won't solve the problem. The 30-year-fixed is the way to go, always. Still, it's a good start. Let's see more of that, and soon. God knows it's needed. Posted at 11:41 AM | TrackBack April 16, 2007 Home Improvement: The Rise And Fall Of Robert Nardelli Ad Age's Al Ries has an interesting look at "the most overpaid CEO in America": "Mr. Nardelli moved to cut back on higher-paid full-time employees with experience as plumbers or handymen," the Wall Street Journal reported, "and to rely more on part-time workers with less experience answering home-improvement questions from customers." This is really the key, to me, of why Nardelli failed. More than at any time in recent history, the housing boom of the past few years meant more people buying refits for their kitchen, garage, patio, etc., because they believed (rightly or wrongly) that they could pull money out of their home equity and return it via a better asking price at sale time. In a situation like that, you're going to want customer support that's knowledgeable and helpful--something a bunch of part-timers cannot be expected to be. People don't shop at Wal-Mart because of the friendly assistance, after all. It's more of a marketing-centric article than real estate, but an interesting read nonetheless. Nardelli has been a morbid pet fascination of mine, as I find his saga emblematic of the housing bubble and bust as a whole, and I am glad he's out on his butt. You can read my selected entries dealing with Nardelli here. Posted at 04:17 PM | TrackBack April 13, 2007 Mortgage & Loan: Fighting Mortgage Fraud One of the sadder aspects of the housing collapse has been overturning the rock to see how much of the market was infected with mortgage fraud. Many subprime loans were pushed with outright fraudulent terms, and many homeowners have lost their homes to terrible "foreclosure rescue scams" and the like. It's good to see people like Massachusetts AG Martha Coakley taking a strong stand against mortgage fraud as foreclosures ravage the state: “These defendants, many of whom were professionals, preyed on vulnerable homeowners facing foreclosure to deceive them out of their home and life savings,” Coakley said in a press statement. “With the number of foreclosures increasing daily, this type of mortgage fraud is particularly troubling.” HUD Inspector General Kenneth Donohue correctly pinned the explosion in mortgage fraud to a lack of oversight and a willingness to look the other way, and recommended some new steps: What are some of the key changes that need to be made at FHA? Mortgage bankers have been creating a predictable model on screening some of these loan applications and that’s good thinking. That’s using technology to your advantage. I think FHA has to weigh in on that. I have not seen that. Well, let's hope he sees it soon. I've mentioned her before, but Rachel Dollar writes and runs what is probably the best and most comprehensive mortgage fraud site around. If you are a victim of mortgage fraud, or are worried about becoming one, go read that right away to get the answers you need. Posted at 06:26 PM | TrackBack National Foreclosure Prevention Program A national foreclosure prevention program and toll-free hotline (888)-995-4673 has been established to help homeowners who are facing foreclosure. Mortgage and loan companies are adding more 'work out' specialists to help homeowners restructure their loans in an effort to keep them in their homes. Some states, like Ohio, have started funds to help homeowners restructure their loans. Congress is working on proposals to get the Federal Housing Administration to help home owners with ARMs. It is clear that many local governments have been ill prepared to deal with the social and economic damage foreclosures can inflict on their communities. Local schools (kids) suffer and quality of life issues arise. A study in the Chicago metro area found that each foreclosure costs the municipal governments more than $30,000. This means less money for local social programs that help keep communities together. The research also determined that one foreclosure can reduce the value of other homes on the same block up to 1.5%, making it harder for people to sell their homes at a good price. It's in the best interests of mortage and loan companies, local, state and federal governments to do what they can to help homeowners facing foreclosure. Unfortunately, no quick fixes exist and the situation could get a whole lot worse before it gets better.
Posted at 12:24 PM | TrackBack April 12, 2007 History of Home Prices in the United States Tracking value of housing as an investment over time. Does this look at all similar to the run up in stocks prior to the dot com bust? This chart does not include the year 2007.
Posted at 10:01 PM | TrackBack April 11, 2007 Housing Prices on a Roller Coaster Ride (Google video) Posted at 09:53 PM | TrackBack Credit & Debt: Meanwhile, Back At The Fed...
It's good to see that Bernanke has his priorities in order: In the minutes, Fed officials worried that the latest readings on core inflation were higher than expected and might not moderate as hoped. They also decided that holding rates steady was the best course to foster moderate economic growth and to bring core inflation down from "its elevated level." But policy-makers also felt surprisingly weak business investment and the rise of delinquencies in subprime mortgage markets were risks to economic growth."The combination of generally weaker-than-expected economic indicators and uncomfortably high readings on inflation suggested increased downside risks to economic growth and greater uncertainty that the expected gradual decline in core inflation would materialize," the Fed said. If you're hoping that the Fed would recommend stronger regulation of predatory lenders and oversight of the subprime sector, think again. Bernanke is a firm believer in the invisible hand: Regulatory oversight of hedge funds is relatively light. Because hedge funds deal with highly sophisticated counterparties and investors, and because they have no claims on the federal safety net, the light regulatory touch seems largely justified. However, the growing market share of hedge funds has raised concerns about possible systemic risk. In other words, the more complex something is, the less likely there is to be anything guiding or watching it. Yep, we're screwed. Posted at 06:37 PM | TrackBack Buying & Selling: Home Prices, Mortgage Apps Both Tumble
This morning we had the news that refinancings were dropping even as new home applications rose: Refinancing applications dropped for the fourth straight week, declining 4.0 percent to 2,015.0, its lowest level since mortgage rates reached their recent peak in late February. But the MBA's seasonally adjusted purchase index rose 2.7 percent to 413.8 last week. Applications to buy homes have been more choppy week to week than refinancings, though are generally trending higher. I'm probably grossly oversimplifying here, but it seems to me that the refinancings are slowing because of higher borrowing costs due to interest rates holding steady. The key to the housing boom was encouraging people to refinance using "creative" mortgages and take out home equity loans out the kazoo. Now, people are simply trying to dump their homes as fast as possible, and that means cutting prices--which opens the door to first-time buyers. And it seems that the NAR agrees with that assessment: The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less. The CNN article goes into gruesome depth about how all homebuying statistics are expected to dip through 2007 and pick up again in 2008, but I wonder if even that is too generous. We're in a long slide, folks, and the bottom is--while getting closer--not quite there yet. Posted at 06:08 PM | TrackBack Mortgage & Loan: Foreclosure Rescue Rangers
As the sad reality of mass foreclosures settles in across the nation, we're seeing a lot of news, punditry, and advice on how to handle the events that surround losing the American Dream. Some of the better links I've come across of late include: * David Bach writes for Yahoo on six ways to avoid foreclosure. Bach makes the point that even when your loan is in default, many banks would rather simply work out a new payment plan than just take your house, as it costs them more to do so--and they'd rather have you as a paying customer for years to come. Well worth reading. * Several prominent civil rights groups are calling for a moratorium on foreclosures , as the epidemic is targeting primarily--but not exclusively--minority homeowners who were snowed with predatory lending and lacking good financial educations. Money quote: "Latino and African-American families are being pushed into high-cost and risky home loans. The result," said Janet Murguia, president of the National Council of La Raza, "is that more of our families are falling victim to loans that were not a good fit in the first place. This is eroding the hard-earned wealth our communities spent decades fighting for." * Much like Best Buy sends out the "Geek Squad" to help you with your technical problems, some lenders are even dispensing mortgage rescue squads to help homeowners in trouble and get them back on their feet. These are all positive developments, and we certainly could use them now--but then again, we could have prevented all of this years ago. I worry that these responses are too much of the "Band-Aid on cancer," and too little of the "castor oil." Posted at 02:08 PM | TrackBack April 09, 2007 Moving & Relocation: The Suburban Poor Two interesting articles on the changing face of urban and suburban demographics of note. First we have a report from the Drum Major Institute on the middle-class squeeze of New York City. The basic upshot is that the city is getting way too expensive, and costs are rising far past the meager increase in typically middle-class wage levels for individuals and families alike. Once they're stuck at their economic level, they are more apt to stay there, and just as apt to flee the cities looking for cheaper places to live. Housing-related excerpt: The last decade of housing policies had a significant impact on the city’s middle class, for both good and ill. Affordable housing construction under Mayors Koch and Bloomberg benefited the city’s middle class, according to our respondents, while the weakening of rent control legislation and the prevalence of subsidies for luxury real estate development harmed middle-class New Yorkers. Second is an essay from the Nation on the increasing numbers of suburban poor. Excerpt: In fact, however, the gentrification of many urban neighborhoods, from Brooklyn to San Francisco to Washington, has forced many working-class residents out. In a reversal of the classic migration story, many of these displaced residents have fled to the suburbs, lured in part by the growing pool of mostly low-wage jobs there--cleaning homes, mowing lawns, staffing restaurants, strip malls and office plazas. Alan Berube, co-author of the Brookings Institution study, says the "decentralization of low-wage employment" is one of the main factors driving suburban poverty rates up. It makes sense when you think about it--the gobbling up of every last square plot of land and development of McMansions and the like subsidized an entire new class of indentured servants. Now that the bubble is failing, the richer are moving back to increasingly-gentrified cities, while the poor are quite literally left behind. One has to wonder if they'll take over those empty homes and turn them into multi-family dwellings. It's totally Kunstlerian, and a frightening glimpse of where we might be headed. Posted at 04:58 PM | TrackBack April 04, 2007 Mortgage & Loan: Predatory Lending Targets Higher-Income Homebuyers
It would seem that the report from the Center for Responsible Lending on subprime mortgages targeted to higher-income buyers was on the mark after all. The Washington Post yesterday looked into the spread of the spread of subprime mortgages in Philadelphia: The Philadelphia study concludes that predatory lenders are not targeting the poorest neighborhoods. Rather, they're seeking moderate-income neighborhoods where they can squeeze the equity of a house. The higher the interest rate on a mortgage, the more commission a loan provider typically makes. The Post article also notes the efforts of D.C. Council member Mary Cheh to introduce legislation to spell out lending terms in clear prose on red paper. I'm not sure why it has to be red, but as long as it's read, that's all that counts. And on the federal level, no less than Dem presidential heavyweight Hillary Clinton is saying the same thing: The New York senator said borrowers should have more access to counseling and unbiased advice on lenders, loan types and refinancing options and that mortgage documents should be written in plain, easy-to-read language. "We need clear, easily understood language in all these documents," Clinton said. "Enough with the confusion and complexity." Now that it's clear that subprime lending and predatory practices are not the exclusive province of the poor-and-nonwhite markets, hopefully we can finally see some good laws put into play that will keep this from happening again. Posted at 05:48 PM | TrackBack April 02, 2007 Mortgage & Loan: New Century Files For Bankruptcy This certainly doesn't come as a particular surprise. From Marketwatch: New Century Financial filed for bankruptcy protection on Monday and said it would lay off 3,200 people, or half its workforce, immediately as the second-largest subprime mortgage lender succumbed to a credit crunch in the sector. Reuters has a timeline of New Century and subprime history in general. Here's an interesting nugget: 1998 - Rising delinquencies and the aftermath of the Russian debt crisis spook investors in subprime, but U.S. Bancorp likes the business enough to strike a strategic alliance with New Century, buying $20 million of its preferred shares. Boy, why don't we pay more attention to the cycles of history, eh? I like the UPI take on it best: The company -- once a multibillion-dollar lender listed on the New York Stock Exchange and now trading on the over-the-counter pink sheets -- said its creditors included Countrywide Financial Corp., Bank of America Corp., Lehman Brothers Bank FSB, Residential Funding Corp. and Goldman Sachs Mortgage Co...The company, founded in 1995, went public two years later and was named to Fortune magazine's list of the 100 fastest-growing companies in 2003 and 2004. From the top of the world to Chapter 11 in twelve years. It could be written off as a poignant metaphor for the housing industry as a whole if it wasn't for the very real 3200 people who are about to be looking for work. Posted at 03:21 PM | TrackBack Go back |
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