Friday, August 31, 2012
Wednesday, August 29, 2012
Housing Trends Newsletter
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Saturday, August 25, 2012
FHFA steering toward REO bulk sales
Real estate professionals are accusing the Federal Housing Finance Administration and Fannie Mae of moving in a “secretive” way to test a bulk-buying house program in the Inland Empire that will squeeze out consumers, shutter viable businesses and harm an already-fragile housing market recovery.
It will change the very face of neighborhoods, some said.
The “REO Initiative,’’ calls for the sale of nearly 500 Fannie Mae-owned foreclosed homes in the Los Angeles and Inland area to yet undisclosed institutional investors, California Association of Realtors president LeFrancis Arnold said.
Realtors say they’ve been kept in the dark and suspect the program has been designed to attract full-scale, hedge fund investment and will carry the caveat the houses are to be rented for a 3- to 5-year period.
“This is not good news,’’ Inland economist John Husing said.
“Injecting large rentals into neighborhoods” that are already under stress can only have a negative impact on home values, he said. “In older cities of the Inland Empire, where there are large numbers of underwater homes and other homes going into foreclosure, it would be a disaster.”
“We are completely against bulk REO sales in our region,’’ said Steve Manos, president of Inland Valleys Association of Realtors. “We’re tight as far as inventory goes. For the fairness of homebuyers in the region, FHFA should reconsider the policy they have of including bulk sales in our region.”
“We want to be opted out,” he said.
On Wednesday, Aug. 22, the California Association of Realtors filed a Freedom of Information Act request with the Federal Housing Finance Administration, Fannie Mae’s conservator, to get specifics on property locations, final property counts involved in the bulk-sales plan, sales prices and names of the winning bidders.
Arnold said the state trade organization is concerned Fannie Mae and its federal overseer are courting big-scale investment because of the secretive approach to putting the program in place.
It also has raised concern that the agencies used outdated market data, perhaps as old as 2011, to determine property valuations.
These dated valuations will drag down the Inland Empire’s home prices, which have shown strong signs of stabilization, Arnold said. The price discrepancy, coupled with the nature of bulk sales, clinches the view that Fannie Mae will fall short of realizing full-market value for the properties, a situation “saddling taxpayers” with their loss.
Corinne Russell, a spokeswoman for the federal agency, issued a one-sentence response to the accusations. “We anticipate making an announcement about the winning bids soon,” Russell said.
The federal agency, earlier this summer, said winning bidders in the foreclosure auction had been chosen, with transactions expected to close in the third quarter. In July, Fannie Mae created a limited liability company in California to leverage the bulk-sale.
It is unknown whether the winning bidders will purchase the full company or only a share, Arnold said.
“Wall Street investors don’t need government incentives to purchase properties by offering (bank-owned) properties at a discount price,’’ he said in a statement. “Savvy individuals recognize that California’s real estate market represents an unprecedented investing opportunity and are already acting on it in droves.”
Manos said there is a “real” housing shortage here.
State association statistics show that bank-owned listings are selling in the Inland area within 30 days. The long-run average for unsold inventory in the Inland area is a 5- to 6-month supply, but currently stands at 3.1 months in Riverside County and 3.8 months in San Bernardino.
Aaron Norris, vice president of The Norris Group, a real estate investment company that reshaped 150 homes it bought last year at trustee sales, declined to comment on the state association stance but confirmed “record-low” inventory.
“It’s not necessary,’’ he said, particularly because consumers are already being squeezed out of the market by all-cash buyers and hedge fund investment in the Inland Empire. “We need more inventory, not less.”
It is having an impact on local business — appraisers, insurance agents, title companies, builders that turned to home renovations and short-sale handlers, he said.
“It’s a bad idea,’’ Frontier Enterprises owner Jim Previti said, as he stood inside the foreclosed home he refurbished for re-sale in Corona. “I don’t sell to investors,’’ he remarked. “I’m in the business of finding new buyers for these homes.”
“The way I see it, this is another twist on Cash for Clunkers,’’ Previti said. “This program will bottle up supply and create artificial demand: We need free market solutions to this.”
U.S. Rep. Gary Miller, R-Diamond Bar, in April sent a letter signed by 18 other lawmakers asking the federal agency to refrain from the “REO Initiative” in California, asserting it was in “direct conflict” with its duty as conservator to preserve its assets. Miller said the approach may make sense in areas with low demand and high inventory, but it isn’t warranted here.
He wrote that selling properties at a discount would negatively impact California’s struggling housing market.
In May, Miller and seven other California congressional members introduced the bill, HR 5823, “Saving Taxpayers from Unnecessary Bulk Sale Programs Act of 2012,’’ to cease the bulk sales plan in California to prevent Fannie Mae properties from going en masse to institutional investors. The bill is currently in the Financial Services Committee and was referred to the subcommittee on capital markets and government-sponsored enterprises.
Friday, August 24, 2012
Short Sales vs Foreclosures: The Banks’ Preference
For months now, that banks were going to begin shifting their focus when liquidating distressed properties. They would start supporting short sales over foreclosures. There is no longer any doubt this is now the new normal.In a recent news release, the FHFA announced new guidelines to streamline the short sale process.
FHFA Acting Director Edward J. DeMarco on the new guidelines:
“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities.”
You can see the new guidelines here.
In a DSNews article, both Fannie Mae and Freddie Mac reaffirmed their desire to proceed with short sales rather than foreclosures.
Leslie Peeler, SVP, National Servicing Organization, Fannie Mae:
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities. We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us.”
Tracy Mooney, SVP Single-Family Servicing & REO at Freddie Mac:
“These changes will make it clear that Freddie Mac servicers have the authority to approve short sales for more borrowers facing the most frequently seen hardships. These changes will further empower the industry to minimize foreclosures and help Freddie Mac in its mission to minimize credit losses and fortify a national housing recovery.”
When developing your business plan for 2013 you need to take into consideration that short sales are going to dramatically increase over the next 18 months.
Thursday, August 16, 2012
Get Your Home Ready to Sell in 30 Days!
If you are considering selling your home, go ahead and start working on the list below. In just 30 days, your home will SHINE! Don't forget to continue with your everyday chores too! You will want your home to be "Show Ready" 24/7!
1. Clean the ceiling fan blades (all of them).
2. Use a damp cloth and wipe down all baseboards. I have heard that following with a fabric softener helps reduce dust build up in the future, but have never tried it myself.
3. Clean out the refrigerator! Be brutal and throw away all those condiments that you can't even remember buying or using! Don't forget to wipe down the outside too, dust the top and if you don't have it on your regular maintenance list.... Vacuum the coils!
4. Clean out the cabinets and drawers in the kitchen. Follow by wiping down the doors and pulls.
5. Pressure Wash the drive and walkways. Clean the siding if necessary, being careful with wood or painted surfaces to avoid chipping or splintering.
6. Pull weeds from gardens, and plant a few colorful flowers
near front door.
near front door. 7. Repair any nail holes or damage to walls and touch up the paint.
8. Wipe down all door knobs and other hardware and polish if necessary.
9. Clean every window.... Inside & out!
10. Clean and organize bathroom cabinets and drawers.
11. Purge the pantry and clean, organize and show potential buyers just how much space is there!
12. Tackle the "honey do" list and fix all those small repairs. You know the ones, the loose door pull, the leaning mailbox, the creaky door hinge, etc.
13. Replace burnt out light bulbs and clean the fixtures while you're at it.
14. As annoying as it is..... clean the grout of your tile floors (and any other tiled surface).
15. Clean the microwave and the oven!
16. Take down curtains and drapes, clean them, and decide whether or not they should be re-hung! Natural light can be a BIG selling point!
17. Purge and de-clutter! If you just can't bring yourself to dispose of ANYTHING.... box it up and store it!
18. Clean and organize your closets! If you haven't worn it in 2 years, chances are, you will never wear it! Get rid of it by donating to a great cause in your area. Then, organize by length and color and it will look amazing! Box up your out of season shoes and clothing and show those buyers just how "roomy" that closet is!
19. Dust! And I mean EVERYTHING! The lamps, the picture frames, the ugly artificial plants & flowers.... EVERYTHING!
20. Vacuum every inch of every room. Under the beds, the sofas, behind the bookshelves, the corners of the ceiling, the air vents (and change the air filters)..... EVERY INCH!
21. Clean the garage. Take everything out (I know it's a big job), sweep, pressure wash the floors, repaint the floor if needed & possible, and then organize as you put the items back. Again, I want you to purge! Do you really need that broken leaf blower or those empty paint cans? Just do it.... It will feel Great!
22. If you store things in the attic or basement, you will need to clean and purge those areas too! Yep, buyers will look in your attic and if they choose to buy the home, a home inspector will appreciate clean and easy access!
23. Clean every sink, tub and toilet and re-caulk if needed.
24. Sweep and clean the patio or deck! If needed, clean any outdoor furniture. Add a couple of new cushions to the outdoor living area or maybe a few potted plants.
25. Clean the gutters, and the roof. Huge piles of pine straw or leaves scream "High Maintenance". If you do not feel comfortable, hire someone to tackle the roof for you..... It can be a dangerous job!26. Wash all of your throw rugs, bedding, pillow covers, blankets, etc. It will help the home smell and look "fresh".
27. Clean the yard! Remove any fallen limbs or trash. Trim shrubs and branches from walkways and keep a clean path around the home. Keep the lawn mowed and raked and looking fabulous. Remember, first impressions are important!
28. I know you live in the home, but try to make it a little less "personal". If you have hundreds of family photos hanging around (I have them too), pack some up. The doll collection that has taken over the guest room, box that up too. By de-personalizing the home, buyers find it easier to imagine the house with their "stuff" in it.
29. Buy a laundry basket or bin for each family member and place in the laundry room or a closet for everyday pickup. When your REALTOR® calls you to schedule a showing, each family member grabs their basket/bin and runs around filling it with items that need to be put away. Then deliver the items to where they belong.
30. On this day, I want you to rest! Call your REALTOR®, let them know you want to sell your home and schedule a meeting. Tell them to go ahead and bring their camera, because the house is READY!
Tuesday, August 14, 2012
Saturday, August 11, 2012
Citigroup tries converting troubled homeowners to renters
Citigroup Inc. is testing a program that would allow distressed homeowners to sign over title to their property and stay on as renters paying less than they did on their mortgages.
The effort is similar to a larger ongoing Bank of America pilot offering up to 2,500 customers the option of avoiding foreclosure by trading their mortgages for leases.
Citigroup's offer is to be extended to about 500 borrowers who owe more than their homes are worth and who are 120 days or more past due on their home loans. The homeowners don't qualify for loan modifications but can afford to rent at market rates, the New York bank announcedWednesday.
"In addition to helping families by keeping homes occupied, the program assists neighborhood revitalization and stabilization efforts, which are crucial to the nation's economic recovery,” Sanjiv Das, chief executive of CitiMortgage, said in a statement.
The program is to be tested starting this month in California, Nevada, Arizona, Florida, Georgia and Texas. It involves $158 million in mortgages that Citigroup has sold to a joint venture formed by Carrington Capital Management, a Greenwich, Conn., hedge fund, and Oaktree Capital Management,the Los Angeles investment giant.
Carrington's Orange County-based loan servicing operation, a specialist in distressed borrowers, will propose the mortgage-to-rent swaps to the homeowners and negotiate leases with those who find the option appealing.
Bank of America's program differs in that the bank itself is handling the conversion of homeowners into renters, with the intent of then selling the leased properties to investors.
A BofA spokesman said the program, which started in March in New York, Nevada and Arizona and later expanded to California, is not yet far enough along to issue a progress report.
Tuesday, August 7, 2012
Should I Rent my home if it doesn't sell?
There has been a lot written about how buying a home is less expensive than renting one in many parts of the country. Rents are skyrocketing and homes are at bargain prices. These two situations are also causing some sellers to consider renting their home instead of selling it. After all, they can get great rental income now and perhaps wait until house values increase in the future before selling.
This logic makes sense in some cases. However, there is a huge difference between deciding you want to become an investor (and landlord) and deciding that renting your primary residence might be ‘easier’ than trying to sell it.
This logic makes sense in some cases. However, there is a huge difference between deciding you want to become an investor (and landlord) and deciding that renting your primary residence might be ‘easier’ than trying to sell it.
Here are some questions every potential landlord should consider:
10 Questions to Ask BEFORE Renting Your Home
1.) How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations? (This happens most often during holiday season and back-to-school time when families with children have extra expenses).
2.) Because of the economy, over ten percent of homeowners can no longer make their mortgage payment. What percent of tenants do you think can no longer afford to pay their rent?
3.) Have you interviewed a few experienced eviction attorneys in case a challenge does arise?
4.) Have you talked to your insurance company about a possible increase in premiums as liability is greater in a non-owner occupied home?
5.) Will you allow pets? Cats? Dogs? How big a dog?
6.) How will you actually collect the rent? By mail? In person?
7.) Repairs are part of being a landlord. Who will take tenant calls when necessary repairs arise?
8.) Do you have a list of craftspeople readily available to handle these repairs?
9.) How often will you do a physical inspection of the property?
10.) Will you alert your current neighbors that you are renting the house?
Remember being a landlord is not for everyone. If you would like to discuss the pros and cons, please feel free to call me or send me an email.
Saturday, August 4, 2012
Interesting Article regarding how debt forgiveness fits into the housing market
By NICK TIMIRAOS
Policy makers are wrestling with a dilemma about the overhang of mortgage debt from the housing bust: to forgive or not to forgive?
With prices down by one-third from their 2006 peak, more than 11 million homeowners are underwater, or owe more than their homes are worth. That is about 24% of all homeowners with a mortgage, according to data firm CoreLogic.
The massive debt overhang—totaling almost $700 billion—is troubling not only because it leaves homeowners more exposed to foreclosure, which further erodes property values. It also weighs on the economy, making homeowners less likely to spruce up their properties and unable to tap equity to start businesses or pay for things like college tuition.
Housing demand also suffers. Without equity, young families are less likely to trade up to bigger places while empty-nesters may be unable to downsize. Perversely, in some of the hardest-hit markets, home prices appear to be stabilizing because there aren't enough homes for sale—in part because so many homeowners are frozen in place.
Recent home-price gains will help a little. CoreLogic estimates that during the first quarter, about 700,000 borrowers climbed out of negative equity thanks to modest price appreciation. But in a handful of states, more than one-third of borrowers are still underwater.
That is reviving calls for policy makers to embrace principal forgiveness. One problem is deciding who deserves help and who doesn't—and who will absorb the losses: taxpayers or mortgage investors. Often the two are the same because taxpayer-supported entities like Fannie Mae and Freddie Mac back about 60% of all mortgages.
Economists are split. "There's no question that in many cases, [principal forgiveness] is the only way to assure people will stay in the house," says Kenneth Rosen of the University of California, Berkeley.
Others say what really matters to borrowers is an affordable monthly payment. "If people have a huge debt burden but the mortgage is not the problem, why are we reducing the mortgage?" asks Thomas Lawler, an independent housing economist in Leesburg, Va.
Fannie and Freddie's federal regulator has been wary of debt forgiveness, saying there are cheaper ways to help homeowners avoid foreclosure.
The Treasury Department tried to force the issue this year when it offered to pick up part of the tab for Fannie and Freddie if the government-supported mortgage giants adopted an existing federal program that subsidizes such write-downs for struggling borrowers. Economists estimate the firms could reach about 300,000 borrowers.
Cost isn't the only issue. Trimming debt only for homeowners who are behind on their mortgage payments could lead other homeowners to default in hopes of getting a break—and could inflame those who believe it is unfair.
Another concern: Many borrowers who are underwater have second mortgages, which are primarily owned by banks, sitting behind the first mortgages that are primarily owned by Fannie, Freddie, and private investors. Writing down taxpayer-backed first mortgages without extinguishing bank-owned seconds is both politically dicey and an inversion of property rights. Is there a way to end this stalemate? Among the ideas offered by economists, private investors and government agencies:
First, Fannie and Freddie could cover closing costs for underwater borrowers who refinance into shorter-term loans with lower rates, a proposal the White House first put forward and that Sen. Jeff Merkley (D., Ore.) introduced in a bill earlier this year. Already, Fannie and Freddie have relaxed refinancing rules so that anyone with a loan backed by the firms can refinance, no matter how underwater, as long as they are current on payments. Accelerating amortization provides less of a break than principal reduction, but it nevertheless returns the borrower to terra firma much sooner.
Columbia University economists Glenn Hubbard, Christopher Mayer, James Witkin and mortgage-bond veteran Alan Boyce spelled out in a paper how this might work. A homeowner who owes 117% of his home's value and who took out a 30-year loan with a 6.7% rate five years ago could refinance now into a 15-year loan with a 3.1% rate. That would increase the monthly payment by just $24. But it would leave the borrower with positive equity in less than three years, assuming home prices stay flat; within five years, the homeowner would have 17% equity. Doing nothing, the borrower would be underwater for more than seven years.
Second, mortgage investors could structure "earned" forgiveness programs that effectively pay deeply underwater borrowers to stay current on their mortgages. Loan Value Group, a Rumson, N.J.-based outfit, has designed such a program, called the "Responsible Homeowner Reward," and is working with about 25,000 borrowers from a half-dozen mortgage firms.
The program works like this: Participating mortgage investors enroll borrowers who receive a small cash "reward" every month that they make their payments. The reward might grow to 10% of the loan balance, but it can be claimed only at some time in the future, usually when the borrower pays off the loan.
Finally, if Fannie and Freddie aren't comfortable implementing a principal-writedown program of their own, they could ramp up sales of defaulted mortgages to investors who buy them at a discount, cut the loan balance, and make money by keeping the borrower in the house. The Federal Housing Administration this month said it would sell about 9,000 of those nonperforming mortgages later this year.
Other initiatives have run into a buzz saw of protest from mortgage investors, including a bid by the White House three years ago to allow judges to write down loans during bankruptcy proceedings. More recently, local governments in California have broached the idea of seizing mortgages through eminent domain and then restructuring them.
Principal reduction isn't a panacea for the nation's housing market. But in a handful of markets, the negative-equity problem will persist for many years. It makes sense for policy makers to at least experiment with how to speed along the clearing process.
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