Quantcast

Are Banks ‘Hoarding Foreclosures’?

Recent housing surveys are showing an uptick in home prices, particularly in cities in warm-weather “sand states” that had been hard-hit during the housing slump, such as in Phoenix, Las Vegas, Miami, and Tampa. But some housing experts worry that the lift in prices may be temporary due to banks “hoarding foreclosures.”

Some real estate professionals allege that the “synthetically pumped prices” are being caused by “banks stockpiling foreclosed properties and purposely keeping them off the market until area prices truly soar.”

For example, in Phoenix, in the “sand state” of Arizona, home prices have been soaring the past six months.

But real estate professional Michelle Tremblay, with West USA Realty in Phoenix, tells MSNBC: “We can see on the street what’s vacant and what’s not. We’re watching these [foreclosed and non-listed] houses just sit and rot. The banks are letting these houses just deteriorate. They’re holding them and releasing them slowly to drive the value up.”

Some markets are seeing a decrease in inventory of for-sale homes, which has helped lift home prices in some areas due to an increase in demand but limited supply. But real estate professionals say they’re concerned what will be temporary when banks start releasing more foreclosures to the market. Some have accused banks of purposely holding onto foreclosures to wait for home prices to recover so that they can get higher returns for the homes, but real estate experts are concerned that could stall the housing recovery.

However, Mark Vitner, Wells Fargo senior economist, asserts that large banks are not hoarding foreclosures and waiting for prices to perk up.

“I don’t think there’s any concerted effort to hold properties back from the market,” Vitner told MSNBC.com. “The process to [work through and re-sell] foreclosure inventory is lengthy and there just seems to be a lot of hurdles out there to getting these properties to market. A lot of the best properties have been in foreclosure and have already sold.”

Backing up that assertion, CoreLogic, a market analytics service, reports that residential shadow inventory — which includes foreclosures — fell to 1.5 million units in April, a 14.8 percent drop from the same month one year earlier.

SOURCE: Real Estate Daily News

Fixed Mortgage Rates Match All-time Record Lows

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates largely unchanged helping to keep homebuyer affordability high for those in the market to purchase or looking to refinance. Both the 30-year fixed and 15-year fixed rate mortgages matched their all-time record lows.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 3.66 percent with an average 0.7 point for the week ending June 28, 2012, the same as last week. Last year at this time, the 30-year FRM averaged 4.51 percent.
  • 15-year FRM this week averaged 2.94 percent with an average 0.7 point, down from last week when it averaged 2.95 percent. A year ago at this time, the 15-year FRM averaged 3.69 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.79 percent this week, with an average 0.6 point, up from last week when it averaged 2.77. A year ago, the 5-year ARM averaged 3.22 percent.
  • 1-year Treasury-indexed ARM averaged 2.74 percent this week with an average 0.4 point, the same as last week. At this time last year, the 1-year ARM averaged 2.97 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.

Quotes

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Mortgage rates were virtually unchanged this week hovering at or near record lows and should further help to support a recovering housing market. Both the S&P/Case Shiller® 20-city composite and the Federal Housing Finance Agency’s house price indexes showed over a 0.5 percent monthly increase in April. Meanwhile, pending existing home sales rebounded in May by 5.9 percent to match a two year high and new home sales jumped 7.6 percent to its fastest pace since April 2010.”

VIDEO: Sun Valley 1950’s Style

Archaeological evidence indicates that as far back as 10,000 years ago, the Wood River Valley was home for Native American people. Not until the 1870s, when gold was discovered in the West, did the European settlers and prospectors begin to populate the valley in search of fortune.

Among the many attractive spots I have visited, this combines the more delightful features of any place I have seen in the United States, Switzerland, or Austria for a winter ski resort.

By the early 1880s, Ketchum was not only a booming mining town, but it also was famous for its healing hot springs. The Guyer Hot Springs Resort, located on Warm Springs Road, was popular with people from around the country for its mineral waters, croquet, tennis, and fun. By the end of 1884, Ketchum boasted 13 saloons, four restaurants, two hotels, and all types of businesses necessary for a thriving town.

 

When Count Felix Schaffgosch arrived in the Valley on January 16, 1936, the once prosperous mining town of Ketchum had transformed into a sleepy little town with a year-round population of only 100 people. The mining boom had come to an end and Ketchum’s population had moved on, leaving only a few behind. The Count had been hired by Union Pacific Chairman Averell Harriman to scout the West for the finest spot on which to build a destination ski resort.

Within three days of arriving in Ketchum, the Count wired Harriman: “Among the many attractive spots I have visited, this combines the more delightful features of any place I have seen in the United States, Switzerland, or Austria for a winter ski resort.”

In less than a year, the luxurious Sun Valley Resort was completed and the doors were open to international publicity. The Sun Valley /Ketchum area was on the map.

With the grand opening of Sun Valley, “America’s First Destination Ski Resort,” celebrities flocked to the area to see America’s new grand dame of ski resorts. Ernest Hemingway fell in love with Sun Valley and eventually made it his home; he finished For Whom the Bell Tolls in Suite 206 of the Sun Valley Lodge. Clark Gable, Gary Cooper, Ingrid Bergman…they all came to play at the glamorous, new winter wonderland.

Evidence of Sun Valley’s star-studded history can be viewed at the Sun Valley Lodge; black and white photos of smiling stars with a Sun Valley backdrop line the walls. Other historical information about the Valley can be found at one of our three museums and at local libraries.

Case Shiller: Home Prices Up 1.3% after 7 Straight Monthly Drops

The Case Shiller Home Price Indexes rose for the first time in eight months in April. The 10- and 20-city indexes each rose 1.3 percent, to the highest levels this year. Year-over-year, the 10-city index was down 2.2 percent and the 20-city index off 1.9 percent, both improvements from March.

Economists had expected the 20-city index to show a 2.3 percent year-year decline in April

Prices improved month-month in all but one of the 20 cities tracked by Case Shiller; prices fell 3.6 percent in Detroit. Prices were up year-year in 10 of the 20 cities.

According to the National Association of Realtors, the median price of an single family home rose 5.4 percent in April while the government report from the Census Bureau and Department of Housing and Urban Development showed the median price of a new home fell 1.5 percent in that month.
Year-year, the median price of an existing single family home was up 7.8 percent in April, according to the NAR and the median price of a new home rose 5.0 percent according to the Census-HUD report.

Month-month price improvements in the cities in the Case Shiller index were led by a 3.4 percent jump in San Francisco followed by Washington DC (2.8 percent), Phoenix (2.5 percent), Atlanta and Cleveland (2.3 percent each) and Portland and Seattle (2.0 percent each). The price improvement Washington came despite a 0.7 percentage point jump in that city’s unemployment rate to 9.0 percent in April. The unemployment rate in each of the other cities showing a price improvement fell, according to date from the Bureau of Labor Statistics.

The year-year price gains were led by Phoenix, 8.6 percent, Minneapolis (3.8 percent), Miami (3.2 percent), and Denver and Dallas (2.8 percent).

Atlanta has the steepest year-year price decline, 17.0 percent, followed by Las Vegas (5.8 percent), Chicago (5.6 percent), New York (3.8 percent) and Los Angeles (3.6 percent).

Even with the improvement in April, the 10-city price index is down 49.3 percent from its June 2006 peak and the 20-city index is down 49.1 percent from its July 2006 high point.

Click here for a copy of the complete Case Shiller report

5 Projections of Where the Housing Market’s Headed

Real estate markets across the country are inching their way to a slow recovery after bottoming out, according to several real estate economists who spoke at a forum hosted by the National Association of Real Estate Editors.

National Association of REALTORS®’ Chief Economist Lawrence Yun, Zillow Chief Economist Stan Humphries, and National Association of Home Builders Chief Economist David Crowe shared their views on the direction of the housing market during the forum.

“Last year was the worst year on record for [new] house sales, for 60 years of housing-sale info,” Crowe said.

But things are picking up, the economists note, despite several challenges still threatening that recovery. Yun says that appraisal issues are holding back up to 20 percent of home sales and that lenders’ tightened mortgage underwriting standards are likely holding back another 15 to 20 percent of potential home deals.

Here are some of the economists’ forecasts:

1. New-home market: The NAHB predicts a 19 percent increase in single-family housing starts this year over last (from 434,000 last year to a projected 516,000 this year).

2. Single-family rental market: This could be the next housing market bubble, Humphries warns. He expects this sector to cool as rental rates continue to increase and as home ownership looks more attractive to the public again.

3. Distressed home sales: The percentage of distressed homes sales is projected to drop by 25 percent in 2012 and 15 percent in 2013, Yun says.

4. Home price appreciation: Yun says it’s possible some markets may see a 10 percent rise in home-price appreciation next year due to an increase in demand, or a 60 to 70 percent increase in housing starts. Yun argues it won’t be both, however, but rather one or the other. He notes it greatly depends on whether lawmakers reach an agreement once again on the looming debt-ceiling deadline.

5. Home owners’ negative equity: About a third of home owners are underwater, owing more on their mortgage than their home is currently worth. As such, the housing recovery will likely be “stair stepped,” Humphries says. He says home owners with negative equity will gradually begin to list their homes as they see prices inch up, but when they do, that may temporarily swell the housing supply and cause a brief pause to the recovery.

SOURCE: Realtor Daily News

Foreclosure, Deficiency Judgments and the Perils of Anti-Deficiency Statutes

Assume that you own a piece of property, and there is a mortgage against that property. Let’s further assume that the amount remaining on the mortgage exceeds the fair market value of the property — what is commonly known as a property “under water”.

Now let’s say that you either cannot or don’t want to pay the mortgage. Maybe you’ve lost your job. Or maybe the value of the property has sunk so low that you doubt that it will come back to the value of the mortgage within your lifetime. In either case, you are either evicted from the property or you voluntarily abandoned it, what is known as “walking away”.

The amount of money that the lender lost on the deal, i.e., the difference between what the outstanding balance of the mortgage and what the foreclosure sale brought, is known in legal parlance as the “deficiency”, i.e., the sale was “deficient” in making the lender whole. A judgment based on the deficiency is known as a “deficiency judgment”, and can include not just the difference in the mortgage and ultimate sale price, but also the costs of the sale, and the attorney’s fees for the foreclosure. In some states, the bank can also tack on interest and penalties.

Here is the question: If the lender forecloses on the property, can the bank then sue you for the deficiency and obtain a deficiency judgment?
The answer is: It depends.

In the vast majority of states, the answer is a firm “Yes”. The lender can foreclose on the property, and then go sue the borrower for the deficiency.

But in a few states have laws that protect the borrower to some degree from the deficiency in some circumstances, most notably the western states of Alaska, Arizona, California, Hawaii, Minnesota, Montana, Nevada, New Mexico, North Dakota, Oregon, and Washington. I’m going to come back to the “in some circumstances” part in a minute.

The statutes that protect borrowers are often known as “ Anti-Deficiency Statutes.”

Can that lender enforce the Florida deficiency judgment against Dr. Able in California, which has an Anti-Deficiency Statute? Yes!

For instance, California is a “single action state” whose laws provide that the lender must foreclose on the collateral, and cannot sue the borrower for the deficiency. In other words, it is possible to walk away from an underwater loan in California in some circumstances and not be chased by the lender for what it lost on the deal.

So now let’s come back to the “in some circumstances” part, which is an application of the General Rule, which is that “ General Rules Are Generally Inapplicable”. The problem with Anti-Deficiency Statutes is that they are like Swiss Cheese — full of holes.

Common exceptions that surprise borrowers include, depending on the particular state’s laws:

  • Anti-Deficiency Statutes often only work for original purchase money loans, and not for re-financed loans, or for home-equity lines of credit (HELOCs).
  • Anti-Deficiency Statutes often only work for residential property, not commercial property or raw land.
  • Anti-Deficiency Statutes often only work for the borrower’s actual and permanent residence, and not second homes, investment homes, rental properties, etc., or if the borrower has sold the property before the foreclosure.

But here is an even bigger trap: Anti-Deficiency Statutes usually do not provide any defense for a deficiency judgment entered in another state!

So, let’s take an example. Let’s say that during a property boom, Dr. Able, who lives in California, was talked into investing in a multi-million home in Sarasota, Florida, which he then rented out. Dr. Able then closed the door to his California medical practice, moved to Sarasota and lived in the home. But when the economy turned bad, Dr. Able’s financial investments also went bad, and he was forced to leave the Sarasota home — which by now is $1 million under water — and move back to California to re-establish his practice. Later, the Sarasota home was foreclosed upon by the lender.

Can that lender enforce the Florida deficiency judgment against Dr. Able in California, which has an Anti-Deficiency Statute?

Yes! The lender only needs to obtain the judgment in Florida, and then register the judgment in California as a sister-state judgment. California is required to enforce the judgment under the Full Faith & Credit clause of the U.S. Constitution. Thus, even though if Dr. Able might have been protected had the Sarasota home been in California, he is not protected against the Florida deficiency judgment.

The point is that it is now where the debtor lives now that determines whether there will be a deficiency judgment, but rather the laws of the state where the property was located. This isn’t good for Dr. Able, since California is a very creditor friendly and debtor unfriendly state and Dr. Able has wages that can now be garnished to satisfy the deficiency judgment.

A couple of recent court opinions illustrate the limitations of Anti-Deficiency Statutes:

Cadlerock Joint Venture, LP v. Lobel, ___ Cal.Rptr.3d ____, 2012 WL 2335916 (Cal.App. 4 Dist., June 20, 2012), as found at http://goo.gl/9f9sW, involved a borrower who was involved in a “piggyback” financing transaction that involved two loans: A first mortgage with a senior lien, and a second mortgage with a junior lien, each given by the same lender. That lender then sold the second mortgage in the secondary market.

When the borrower defaulted on both loans, the lender foreclosed on the property which wiped out the junior lien. The buyer of the second mortgage then sued the borrower, and the borrower screamed “Single Action Rule!” in defense. The trial court agreed with the borrower, but the California Court of Appeals did not, basically holding that because the junior lien had been extinguished, there was no foreclosure that the buyer of the second mortgage could make, and thus it was not prohibited from its “first action” of suing the borrower for the deficiency.

Notably, had the same lender kept both loans, then the borrower could have asserted the Single Action Rule, but the way this loan was structured allowed the lender to sell the second mortgage, and that came back to bite the borrower — Surprise!

The other case, Old Republic Ins. Co. v. Stephenson, 2012 WL 1939735 (Ariz.App. Div. 1, Unreported, May 29, 2012), as found at http://goo.gl/cVQyg, involved the very good Phoenix collection attorney Jon Hultgren for the prevailing party.

There, the borrower financed the entire purchase price of his home with two loans from the same lender, one loan for 80% of the purchase price, and the other loan for 20% of the purchase price (and folks wonder why we had a financial crisis, with borrowers getting loans with zero money down).

The borrower then took a HELOC against his home and used most of the money to pay down the second (20%) mortgage. The rest of the money from the HELOC ($40,000), the borrower pocketed as cash. Later, the HELOC was sold to an investor.

Then, the borrower defaulted, and the lender, which still held the first (80%) loan, foreclosed on the home. This wiped out the security for the HELOC.

The investor in the HELOC then sued the borrower for the $40,000 which the borrower had pocketed and not applied towards the loans. The borrower argued that Arizona’s Anti-Deficiency Statute should protect him, since the HELOC simply replaced the original purchase-money loan (the 20%).

However, the Arizona courts did not agree, and allowed the investor to obtain a judgment against the borrower for the $40,000 which the borrower had pocketed from the HELOC.

The lesson in these cases is that the laws regarding Anti-Deficiency Statutes are very complicated and fraught with exceptions. Don’t just presume that you are protected.

SOURCE: Forbes

Ride Sun Valley Bike Festival – A full week of cycling-related events

U.S. National Championships- MTB Cross Country

The 2nd Annual Ride Sun Valley Mountain Bike Festival showcases the Sun Valley area’s 400+ miles of continuous singletrack in an event centered around some of the best race courses in the US. Sun Valley is a bike rider’s paradise with over 32 miles of multi-use paved bike paths, two bike parks, and miles of scenic road riding.

A full week of cycling-related events including races, rides, competitions, film/photo shootouts, a consumer expo, live music, and much more comes to Sun Valley.  For a complete run-down on the event schedule please visit: www.ridesunvalley.com. 

Foreclosures Can Be Valid Without Mortgage Note, Court Says

Massachusetts’s highest court ruled that a foreclosure sale in the state can be valid even when the entity foreclosing on the home doesn’t hold the mortgage note as long as it has proper authority.

The state’s Supreme Judicial Court reversed a lower court decision, saying it is enough that the foreclosing party is acting on behalf of the note holder and doesn’t need to physically possess the note, according to a decision today.

The case stems from a foreclosure involving mortgage- finance company Fannie Mae. The homeowner, Henrietta Eaton, claimed the foreclosure on her home in the Roslindale section of Boston was invalid because the mortgage servicer didn’t hold the mortgage note and lacked the authority to foreclose, according to the court’s decision.

Samuel Levine, a Harvard Law School graduate who represented Eaton in the case, said in an interview that the decision is a victory for homeowners facing foreclosure because servicers will have to establish their authority to foreclose. It will require more due diligence by lenders before seizing homes, he said.

“Our hope is that with this ruling it will create some clarity and create some actual opportunity for homeowners to figure out who owns their loan,” Levine said in a telephone interview.

Highest Bidder

At a foreclosure auction in 2009, mortgage servicer Green Tree Servicing LLC was the highest bidder for Eaton’s home and then transferred the property to Fannie Mae.

The lower court blocked Eaton’s eviction from the home, saying she would probably succeed in proving the transfer was void, according to today’s decision. That court said a foreclosing entity at the time of the sale must hold both the mortgage and the underlying mortgage note. Green Tree had stipulated that it didn’t hold the note.

The Supreme Judicial Court’s ruling applies only to future foreclosures and not past home seizures, the court said. Fannie Mae argued in court papers that a retroactive ruling requiring a united mortgage and note for a foreclosure would damage title to properties that were subject to earlier repossession.

“Today’s ruling will hopefully bring clarity and certainty to the foreclosure process in Massachusetts,” Andrew Wilson, a Fannie Mae spokesman, said in an e-mailed statement.

The Supreme Judicial Court remanded the case to the Superior Court and said Eaton may argue that Green Tree neither held the note nor acted on behalf of the note holder.

The case is Eaton v. Federal National Mortgage Association, 11041, Supreme Judicial Court of Massachusetts (Boston).

SOURCE: Bloomberg

Sales Show Housing’s Fragile Recovery

Sales of previously owned homes in May posted sharp gains compared with a year ago, but were down from April, underscoring the fragility of the housing market’s recovery.

The National Association of Realtors reported Thursday that sales of existing, or previously owned, homes sold at a seasonally adjusted annual rate of 4.55 million units in May.

While that was down 1.5% from 4.62 million in April, it represented an increase of 9.6% compared with a year earlier and represented the 11th consecutive month of year-over-year increases in sales.

The data reflect completed sales transaction of single-family homes, townhouses and condominiums.

The monthly drop reflected tight inventory rather than softening demand, said Lawrence Yun, the Realtors’ chief economist. “The normal seasonal upturn in inventory did not occur this spring,” he said. The result, said Mr. Yun, is a shortage of properties for sale.

The monthly drop reflected tight inventory rather than softening demand

That is partly because some potential sellers are keeping their homes off the market in hopes of higher prices in the future. At the end of May, there was a 6.6-month supply of homes for sale, slightly higher than April but 20% below levels of a year ago, according to the report.

Banks have contributed to the tight inventory by limiting the number of foreclosed properties they put up for sale. Distressed properties—which includes foreclosures—accounted for a quarter of all sales in May, down from 31% in the same month a year ago.

“There’s been a pent-up demand,” said Joan Downing, a Realtor in Bloomfield Hills, Mich. “Sellers held off selling because they thought they’d have to price their properties really low, and buyers held off because they thought the prices would keep coming down and down and down.”

Meanwhile, prices are edging higher. The national median price of an existing home in May was $182,600, up 7.9% from a year ago and the third consecutive month of year-to-year price gains.

In Winnetka, Ill., dermatologist James Lahti just sold his $1.04 million home to move into a larger six-bedroom nearby. He wanted a bigger backyard and more space for his family.

“We were living in a house that we knew we would be outgrowing,” said the 44-year old father of four. The house he bought for $1.87 million had been on the market for more than 400 days. Meanwhile, Mr. Lahti’s old house received multiple offers and went into contract within five days.

The normal seasonal upturn in inventory did not occur this spring. The result is a shortage of properties for sale

The family was motivated to buy and sell quickly because they wanted to take advantage of low interest rates. “We figured if we waited, it could only make the situation much worse” if rates went up again quickly, he said. A Freddie Mac survey this week showed 30-year fixed-rate mortgages fell to 3.66%, a record low.

Despite the recent improvements in the housing market, concern that conditions could change has made some people anxious. Dennis Bledsoe, 73, of Walnut Creek, Calif., sold his home six weeks ago for $450,000 and moved into a retirement community. “I did not want to take the chance of prices dropping quickly,” he said. “If that happened I would be stuck, so I figured it would be time to make some kind of move.”

SOURCE: Wall Street Journal, National Association of Realtors

30-year mortgage rate hits another record low at 3.66%

The 30-year fixed-rate mortgage average fell to a record low of 3.66% in the week ending June 21, down from 3.71% in the prior week, Freddie Mac said Thursday in its weekly report. The rate was 4.50% a year earlier.

The results of its Primary Mortgage Market Survey® (PMMS®), showing average mortgage rates easing amid worsening economic indicators. Both the 30-year fixed and the 5-year ARM registered new average record lows.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 3.66 percent with an average 0.7 point for the week ending June 21, 2012, down from last week when it averaged 3.71 percent. Last year at this time, the 30-year FRM averaged 4.50 percent.
  • 15-year FRM this week averaged 2.95 percent with an average 0.6 point, down from last week when it averaged 2.98 percent. A year ago at this time, the 15-year FRM averaged 3.69 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.77 percent this week, with an average 0.6 point, down from last week when it averaged 2.80. A year ago, the 5-year ARM averaged 3.25 percent.
  • 1-year Treasury-indexed ARM averaged 2.74 percent this week with an average 0.5 point, down from last week when it averaged 2.78 percent. At this time last year, the 1-year ARM averaged 2.99 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.

Quotes
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

  • “Treasury bond yields eased somewhat this week on some worsening economic indicators bringing mortgage rates back into record low territory. Industrial production fell in two of the last three months ending in May, and below the expected market consensus forecast. In addition, consumer sentiment fell in June to its lowest level this year, according to the University of Michigan survey. In its June 20th monetary policy announcement, the Federal Reserve also noted growth in employment has slowed in recent months and household spending appears to be rising at a somewhat slower pace.
  • “However, there were also some positive indicators on the housing market. Construction on one-family homes rose for the third consecutive month in May to an annualized pace of 516,000. Furthermore, homebuilder confidence rose in June to its highest reading in over five years.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four homebuyers and is one of the largest sources of financing for multifamily housing. www.FreddieMac.com.

SOURCE Freddie Mac