In the past two days, mortgage rates have risen across the board by an average of 1/4%. This is significant and affects buying power & payments. Will this continue? Watch today as I give my predictions!
Tag: Business
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America’s Credit and Housing Crisis: New State Bank Bills, Marketoracle.co.uk
Seventeen states have now introduced bills for state-owned banks, and others are in the works. Hawaii’s innovative state bank bill addresses the foreclosure mess. County-owned banks are being proposed that would tackle the housing crisis by exercising the right of eminent domain on abandoned and foreclosed properties. Arizona has a bill that would do this for homeowners who are current in their payments but underwater, allowing them to refinance at fair market value.
The long-awaited settlement between 49 state Attorneys General and the big five robo-signing banks is proving to be a majordisappointment before it has even been signed, sealed and court approved. Critics maintain that the bankers responsible for the housing crisis and the jobs crisis will again be buying their way out of jail, and the curtain will again drop on the scene of the crime.
We may not be able to beat the banks, but we don’t have to play their game. We can take our marbles and go home. The Move Your Money campaign has already prompted more than 600,000 consumers to move their funds out of Wall Street banks into local banks, and there are much larger pools that could be pulled out in the form of state revenues. States generally deposit their revenues and invest their capital with large Wall Street banks, which use those hefty sums to speculate, invest abroad, and buy up the local banks that service our communities and local economies. The states receive a modest interest, and Wall Street lends the money back at much higher interest.
Rhode Island is a case in point. In an article titled “Where Are R.I. Revenues Being Invested? Not Locally,” Kyle Hence wrote in ecoRI Newson January 26th:
According to a December Treasury report, only 10 percent of Rhode Island’s short-term investments reside in truly local in-state banks, namely Washington Trust and BankRI. Meanwhile, 40 percent of these investments were placed with foreign-owned banks, including a British-government owned bank under investigation by the European Union.
Further, millions have been invested by Rhode Island in a fund created by a global buyout firm . . . . From 2008 to mid-2010, the fund lost 10 percent of its value — more than $2 million. . . . Three of four of Rhode Island’s representatives in Washington, D.C., count [this fund] amongst their top 25 political campaign donors . . . .
Hence asks:
Are Rhode Islanders and the state economy being served well here? Is it not time for the state to more fully invest directly in Rhode Island, either through local banks more deeply rooted in the community or through the creation of a new state-owned bank?
Hence observes that state-owned banks are “[o]ne emerging solution being widely considered nationwide . . . . Since the onset of the economic collapse about five years ago, 16 states have studied or explored creating state-owned banks, according to a recent Associated Press report.”
2012 Additions to the Public Bank Movement
Make that 17 states, including three joining the list of states introducing state bank bills in 2012: Idaho (a bill for a feasibility study), New Hampshire (a bill for a bank), and Vermont (introducing THREE bills—one for a state bank study, one for a state currency, and one for a state voucher/warrant system). With North Dakota, which has had its own bank for nearly a century, that makes 18 states that have introduced bills in one form or another—36% of U.S. states. For states and text of bills, see here.
Other recent state bank developments were in Virginia, Hawaii, Washington State, and California, all of which have upgraded from bills to study the feasibility of a state-owned bank to bills to actually establish a bank. The most recent, California’s new bill, was introduced on Friday, February 24th.
All of these bills point to the Bank of North Dakota as their model. Kyle Hence notes that North Dakota has maintained a thriving economy throughout the current recession:
One of the reasons, some say, is the Bank of North Dakota, which was formed in 1919 and is the only state-owned or public bank in the United States. All state revenues flow into the Bank of North Dakota and back out into the state in the form of loans.
Since 2008, while servicing student, agricultural and energy— including wind — sector loans within North Dakota, every dollar of profit by the bank, which has added up to tens of millions, flows back into state coffers and directly supports the needs of the state in ways private banks do not.
Publicly-owned Banks and the Housing Crisis
A novel approach is taken in the new Hawaii bill: it proposes a program to deal with the housing crisis and the widespread problem of breaks in the chain of title due to robo-signing, faulty assignments, and MERS. (For more on this problem, see here.) According to a February 10th report on the bill from the Hawaii House Committees on Economic Revitalization and Business & Housing:
The purpose of this measure is to establish the bank of the State of Hawaii in order to develop a program to acquire residential property in situations where the mortgagor is an owner-occupant who has defaulted on a mortgage or been denied a mortgage loan modification and the mortgagee is a securitized trust that cannot adequately demonstrate that it is a holder in due course.
The bill provides that in cases of foreclosure in which the mortgagee cannot prove its right to foreclose or to collect on the mortgage, foreclosure shall be stayed and the bank of the State of Hawaii may offer to buy the property from the owner-occupant for a sum not exceeding 75% of the principal balance due on the mortgage loan. The bank of the State of Hawaii can then rent or sell the property back to the owner-occupant at a fair price on reasonable terms.
Arizona Senate Bill 1451, which just passed the Senate Banking Committee 6 to 0, would do something similar for homeowners who are current on their payments but whose mortgages are underwater (exceeding the property’s current fair market value). Martin Andelman callsthe bill a “revolutionary approach to revitalizing the state’s increasingly water-logged housing market, which has left over 500,000 ofArizona’s homeowners in a hopelessly immobile state.”
The bill would establish an Arizona Housing Finance Reform Authority to refinance the mortgages of Arizona homeowners who owe more than their homes are currently worth. The existing mortgage would be replaced with a new mortgage from AHFRA in an amount up to 125% of the home’s current fair market value. The existing lender would get paid 101% of the home’s fair market value, and would get a non-interest-bearing note called a “loss recapture certificate” covering a portion of any underwater amounts, to be paid over time. The capital to refinance the mortgages would come from floating revenue bonds, and payment on the bonds would come solely from monies paid by the homeowner-borrowers. An Arizona Home Insurance Fund would create a cash reserve of up to 20 percent of the bond and would be used to insure against losses. The bill would thus cost the state nothing.
Critics of the Arizona bill maintain that it shifts losses from collapsed property values onto banks and investors, violating the law of contracts; and critics of the Hawaii bill maintain that the state bank could wind up having paid more than market value for a slew of underwater homes. An option that would avoid both of these objections is one suggested by Michael Sauvante of the Commonwealth Group, discussed earlierhere: the state or county could exercise its right of eminent domain on blighted, foreclosed and abandoned properties. It could offer to pay fair market value to anyone who could prove title (something that with today’s defective title records normally can’t be done), then dispose of the property through a publicly-owned land bank as equity and fairness dictates. If a bank or trust could prove title, the claimant would get fair market value, which would be no less than it would have gotten at an auction; and if it could not prove title, it legally would have no claim to the property. Investors who could prove actual monetary damages would still have an unsecured claim in equity against the mortgagors for any sums owed.
Rhode Island Next?
As the housing crisis lingers on with little sign of relief from the Feds, innovative state and local solutions like these are gaining adherents in other states; and one of them is Rhode Island, which is in serious need of relief. According to The Pew Center on the States, “The country’s smallest state . . . was one of the first states to fall into the recession because of the housing crisis and may be one of the last to emerge.”
Rhode Islanders are proud of having been first in a number of more positive achievements, including being the first of the 13 original colonies to declare independence from British rule. A state bank presentation was made to the president of the Rhode Island Senate and other key leaders earlier this month that was reportedly well received. Proponents have ambitions of making Rhode Island the first state in this century to move its money out of Wall Street into its own state bank, one owned and operated by the people for the people.
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com.
Ellen Brown is a frequent contributor to Global Research. Global Research Articles by Ellen Brown
© Copyright Ellen Brown 2012
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.
http://www.marketoracle.co.uk/Article33365.html
Related articles
- Move Our Money: Should we create more state banks? (energybulletin.net)
- New State Bank Bills Address Credit and Housing Crises (webofdebt.wordpress.com)
- North Dakota bank eyed by cash-hungry politicians (sfgate.com)
- Rhode Island drops Fordham 78-58 (newsok.com)
- Structural Reform: The Case for Public State Banks (beavercountyblue.org)
- Rhode Island En Route To Upgrading Crappy Civil Unions To Real Gay Marriages (queerty.com)
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Has Housing Really Bottomed? Oftwominds.com
Massive intervention by Federal agencies and the Federal Reserve have kept the market from discovering price and the risk premium in real estate. That sets up a “catch the falling knife” possibility for impatient real estate investors.
A substantial percentage of many households’ net worth is comprised of the equity in their home. With the beating home prices have taken since 2007, existing and soon-to-be homeowners are keen to know: Are prices stabilizing? Will they begin to recover from here? Or is the “knife” still falling?
To understand where housing prices are headed, we need to understand what drives them in the first place: policy, perception, and price discovery.
In my December 2011 look at housing, I examined systemic factors such as employment and demographics that represent ongoing structural impediments to the much-awaited recovery in housing valuations and sales. This time around, we’re going to consider policy factors that influence the housing market.
Yesterday while standing in line at our credit union I overheard another customer at a teller’s window request that her $100,000 Certificate of Deposit (CD) be withdrawn and placed in her checking account because, she said, “I’m not earning anything.” The woman was middle-aged and dressed for work in a professional white- collar environment — a typical member, perhaps, of the vanishing middle class.
Sadly, she is doing exactly what Ben Bernanke’s Federal Reserve policies are intended to push people into doing: abandoning capital accumulation (savings) in favor of consumption or trying for a higher yield in risk assets such as stocks and real estate.
It may strike younger readers as unbelievable that a few decades ago, in the low-inflation 1960s, savings accounts earned a government-stipulated minimum yield of 5.25%, regardless of where the Fed Funds Rate might be. Capital accumulation was widely understood to be the bedrock of household financial security and the source of productive lending, whether for 30-year home mortgages or loans taken on to expand an enterprise.
How times — and the US economy — have changed.
Now the explicit policy of the nation’s private central bank (the Federal Reserve) and the federal government’s myriad housing and mortgage agencies is to punish saving with essentially negative returns in favor of blatant speculation with borrowed money. Official inflation is around 3% and savings accounts earn less than 0.1%, leaving savers with a net loss of about 3% every year. Even worse — if that is possible — these same agencies have extended housing lenders trillions of dollars in bailouts, backstops and guarantees, creating institutionalized moral hazard on an unprecedented scale.
Recall that moral hazard simply means that the relationship between risk and return and has been severed, so risk can be taken in near-infinite amounts with the assurance that if that risk blows up, the gains remain in the hands of the speculator. Another way of describing this policy of government bailouts is “profits are private but losses are socialized.” That is, any profits earned from risky speculation are the speculator’s to keep, while all the losses are transferred to the public.
While the housing bubble was most certainly based on a credit bubble enabled by lax oversight and fraudulent practices, the aftermath can be fairly summarized as institutionalizing moral hazard.
Policy as Behavior Modification and Perception Management
Quasi-official pronouncements by Fed Board members suggest that the Fed’s stated policy of punishing savers with a zero-interest rate policy (ZIRP) is outwardly designed to lower the cost of refinancing mortgages and buying a house. The first is supposed to free up cash that households can then spend on consumption, thereby boosting the economy. With savings earning a negative yield, consuming more becomes a tangibly attractive alternative. (How keeping the factories in Asia humming will boost the American economy is left unstated.)
This near-complete destruction of investment income from household savings yields a rather poor return. Plausible estimates of the total gain that could be reaped by widespread refinancing hover around $40 billion a year, which is not much in a $15 trillion economy.
There are real-world limits on this policy as well. Since the Fed can’t actually force lenders to refinance underwater mortgages, millions of homeowners are unable to take advantage of lower rates. From the point of view of lenders, declining household incomes and mortgages that exceed the home value (so-called negative equity) have lowered the creditworthiness of many homeowners.
As a result, the stated Fed policy goal of lowering mortgage payments to boost consumer spending has met with limited success. Somewhat ironically, the mortgage industry’s well-known woes — extended time-frames for involuntary foreclosure, lenders’ hesitancy to concede to short sales (where the house is sold for less than the mortgage and the lender absorbs a loss), and strategic/voluntary defaults — may be putting an estimated $80 billion in “free cash” that once went to mortgages into defaulting consumer’s hands.
The failure of the Fed’s policies to increase household’s surplus income via ZIRP leads us to the second implicit goal, lowering the cost of home ownership via super-low mortgage rates, which serves both as behavior modification and perception management. If low-interest rate mortgages and subsidized Federal programs that offer low down payments drop the price of home ownership below that of renting an equivalent house, then there is a substantial financial incentive to buy rather than rent.
The implicit goal is to shape a general perception that the bottom is in, and it’s now safe to buy housing.
First-time home buying programs and FHA (Federal Housing Authority) and VA (Veterans Administration) loans all offer very low down-payment options to qualified buyers. This extends a form of moral hazard to buyers as well as lenders: If a buyer need only scrape up $2,000 to buy a house, their losses are limited should they default to this same modest sum. Meanwhile, lenders working under the guarantee of FHA- and VA-backed loans are also insured against losses.
The Fed’s desire to boost home sales by any means available is transparent. By boosting home sales, it hopes to stem the decline of house valuations and thus stop the hemorrhaging of bank losses from writing down impaired loan portfolios, and also stabilize remaining home equity for households, which has shrunk to a meager 38% of housing value.
As many have noted, given that about 30% of all homes are owned free and clear, the amount of equity residing in the 70% of homes with a mortgage may well be in the single digits. (Data on actual equity remaining in mortgaged homes is not readily available, and would be subject to wide differences of opinion on actual market valuations.)
Broadly speaking, housing as the bedrock of middle class financial security has been either destroyed (no equity) or severely impaired (limited equity). The oversupply of homes on the market and in the “shadow inventory” of defaulted/foreclosed homes awaiting auction has also impaired the ability of homeowners to sell their property; in this sense, any remaining equity is trapped, as selling is difficult and equity extraction via HELOCs (home equity lines of credit) has, for all intents and purposes, vanished.
The Fed’s strategy, in conjunction with the government-owned and -operated mortgage agencies that own or guarantee the majority of mortgages in the US (Fannie Mae, Freddie Mac, FHA, and the VA), is to stabilize the housing market through subsidizing the cost of mortgage borrowing by shifting hundreds of billions of dollars out of savers’ earnings with ZIRP.
Since roughly 60% of households either already own a home or are ensnared in the default/foreclosure process, then the pool of buyers boils down to two classes: buyers who would be marginal if not for government subsidies and super-low mortgage rates, and investors seeking some sort of return above that of US Treasury bonds. The Fed has handed investors two choices to risk a return above inflation: equities (the stock market) or real estate. Given the uneven track record of stocks since the 2009 meltdown, it is not much of a surprise that investors large and small have been seeking “deals” in real estate as a way to earn a return.
Recent data from the National Association of Realtors concludes that cash buyers (a proxy for investors) accounted for 31% of homes sold in December 2011. Even in the pricey San Francisco Bay Area, where median prices are still in the $350,000 range, investors accounted for 27% of all sales. Absentee buyers (again, a proxy for investors) paid a median price of around $225,000, substantially lower than the general median price.
This data suggests that “bargain” properties are being snapped up for cash, either as rental properties or in hopes of “flipping” for a profit after some modest cleanup and repair.
Price and Risk Premium Discovery
There is one lingering problem with the Fed and the federal housing agencies’ concerted campaigns to punish capital accumulation, push investors into equities or real estate, and subsidize marginal buyers to boost sales at current valuations. The market cannot “discover” price or establish a risk premium when the government and its proxies are, in essence, the market.
By some accounts, literally 99% of all mortgages in the U.S. are government-issued or -guaranteed. If any other sector was so completely owned by the federal government, most people would concede that it was a socialized industry. Yet we in the US maintain the fiction of a “free market” in mortgages and housing.
To establish a truly free and transparent market for mortgages and housing, we would have to end all federal subsidies and guarantees/backstops, and restore the market as sole arbiter of interest rates — i.e., remove that control from the Federal Reserve.
Everyone with a stake in the current market fears such a return to an open market because it is likely that prices would plummet once government subsidies, guarantees, and incentives were removed. Yet without such an open market, buyers can never be certain that price and risk have truly been discovered. Buyers in today’s market may feel that the government has removed all risk from buying, but they might find that they “caught the falling knife;” that is, bought into a false bottom in a market that has yet to reach transparent price discovery.
So, the key question still remains for anyone who owns a home or is looking to soon own one…how close are we to the bottom in housing prices?
In Part II: Determining the Housing Bottom for Your Local Market, we tackle that question head-on. Because local dynamics inevitably play such a large role in determining fair pricing for any given market, instead of giving a simple forecast, we instead offer a portfolio of tools and other resources for analyzing home values on a local basis. Our goal is to empower readers to calculate an informed estimate of “fair value” for their own markets — and then see how closely current local real estate prices fit (or deviate) from it.
Click here to access Part II of this report (free executive summary, enrollment required for full access).
This article was originally published on chrismartenson.com.
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- More homeowners staying current on their mortgages (freedommortgage.com)
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Is The National Association Of Realtors Hurting The Real Estate Market? by Brett Reichel, Brettreichel.com
Yesterday, a fairly sophisticated home buyer called me about a pre-approval. He and his wife own a home, and a vacation home. This is a successful business couple who are doing well in the residential construction market despite the current economy. He indicated that they wanted to buy a new primary residence. His question to me was “We can get together about 10% down. Can we even buy a new home with less than 20% down?”
It’s no wonder they are confused. Every other article where leadership of the National Association of Realtors is quoted, every press release they issue usually has the quote that “tight lender guidelines are hurting the real estate market” or “buyers need to have 20% down and be perfect to accomplish a purchase” or some words like that.
Unfortunately, these types of statements are blatantly untrue in most markets, and are very damaging to the real estate market at large and to home buyers and sellers everywhere.
It’s true that lenders are giving loan applications MUCH greater scrutiny than they have in any time since 1998. Rampant mortgage fraud on the part of borrowers, Realtors, lenders, and mortgage originators have required lenders to check and recheck everything represented in a loan application. Unfortunatley, until we get everyone to realize that the “silly bank rules” they are breaking consititutes a federal crime we are stuck with the extra scrutiny. Fortunately, the new national loan originator licensing and registration systems should make loan officers everywhere realize the seriousness of this issue and root out fraud before it get’s to the point of a loan being funded. The safety of our banking and financial systems is too important to allow the kinds of games that have been played over the last few years.
The National Association of Realtors is right about appraisals. Appraisals remain a very serious issue. Pressure from Fannie Mae and Freddie Mac on lenders results in pressures by lending institutions on appraisers to bring in appraisals very conservatively. It’s common for appraisers to use inappropriate appraisal practice due to the Fannie Mae/Freddie Mac form1004mc, which results in innacurate appraisal (see previous posts).
It’s also true that underwriting guidelines are stricter than they were during the golden age of loose underwriting (1998 thru 2008). What people don’t realize that underwriting guidelines are easier now than they’ve been in any previous time frame. In fact, it’s a great time to buy for many folks who have been priced out of markets previously.
How can I make that type of claim? Because I remember the “bad old days”…..Prior to 1997-1998, debt-to-income ratio’s were much stricter than they are now. A debt-to-income ratio compares your total debt to your total income. In the old days, if you put 5% down on a conventional loan, you couldn’t have more than 36% of your total income go towards your debt. Now? If you’ve been reasonably careful with your credit, have decent job stability, and a little savings left over for emergency it’s pretty easy to get to a ratio of 41%! With only 5% down! On FHA loans, it’s really easy to go to 45% DTI with only 3.5% down! In fact, there are times that we go even higher.
Is that obvious in the mass media? No. They paint a dire picture based, in part, on the statements of NAR.
So, if you are a Realtor, press NAR to paint a more positve picture of financing. Nothing that is “puffed up”, just reality. If you are a buyer, don’t be fooled by what you read in the mainstream press. Talk to a good, local, independent mortgage banker. They’ll give you a clear path to home ownership and join the ranks of homeowners!
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The Home Loan Application, by Jason Hillard , Homeloanninjas.com
Applying for a home loan is quite a process. A good place to get familiar with the process is the home loan application. I made a video awhile back showing the different sections of the loan application:
Some things to know when you apply for a home loan:
- Detailed residence history for the last 2 years
- Detailed employment history for the last 2 years
- Knowledge of your various bank accounts, retirement accounts, and other liquid assets
- Social Security number
- A good idea of your credit history – dates of bankruptcy discharge, etc
Obviously, there’s more to it than that. But those items might be things you wouldn’t usually think about. It helps to have the following put together when you fill out the loan application:
- Most recent 30 days of paystubs for all borrowers
- Most recent bank statements; all pages, all accounts
- Most recent retirement or 401k statements
- Last 2 years Federal tax returns; all pages, with w2s
- Business tax returns if applicable
- Divorce decree/child support paperwork if applicable
- Award letters for Social Security/VA/Disability if applicable
- Pension letters/Annuity statements if applicable
- Bankruptcy Discharge paperwork if applicable
That sounds like a lot of stuff to put together, but the truth is it will help your Mortgage Professional put your application together, and the underwriter will need to document and verify all of those items anyway.
You might as well begin prepared.
For more information about the home loan application, and a copy you can download and get familiar with, check out my website. I try to provide valuable information about home loans in Oregon and Washington, rather than empty sales pitches. Thanks!
Jason Hillard – homeloanninjas.com
Mortgage Advisor in Oregon and Washington MLO#119032
Pinnacle Mortgage Bankers
a div of Pinnacle Capital Mortgage Corp
503.799.4112
1706 D St Vancouver, WA 98663
NMLS 81395 WA CL-81395
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RATES WAY DOWN, APPS WAY UP… THAT’S GOOD, RIGHT?, by Diane Mesgleski, Mi–Explode.com
Last week mortgage applications rose a whopping 21.7% from the previous week according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Great news for the industry to be sure. Great news for the housing market? Not so much, when you consider that the bulk of the applications are refinances, not purchases. Refis rose 31% from the previous week, while purchases remain low. Actually they dropped a skooch. Low purchase numbers mean continued stagnation in the housing market and continued increase in inventory as foreclosures continue to be added to the count. Which means lower values. Kind of a vicious cycle. Those of us in the mortgage biz were not surprised by last week’s numbers, since low rates spur refis and rising interest rates signal a purchase market. You don’t even need to understand the reason why, you just know that is how it works. It is comforting to know that something is working the way it always has.
What is not comforting is the bewildered Fed chairman, and many baffled economists who don’t understand why the present policies are not working. Even if rates could go lower it would not have an impact on the housing market. There is no lack of money to lend, there is a lack of qualified borrowers. And that situation is not improving with time, it is getting worse. At the same time Washington is tightening their stranglehold on lenders with ever increasing regulation, then wondering why banks are not lending. No matter what you believe should be the course, whether more regulation or less, you have to agree that government intervention has not and is not helping.
Has anybody else noticed, the only winner in this current climate are the Too Big To Fail banks? They have plenty of cash, since they cannot lend it. One article I read put it this way, their balance sheets are “healing”. Sounds so soothing you almost forget to be angry.
There is one other factor in the current housing crisis worth mentioning: the lack of consumer confidence. Nobody is going to buy a house when the prices are continuing to fall. And even in areas where the prices are stable, people have no confidence in the economy or in Washington’s ability or willingness to fix it. They are simply afraid to make the biggest investment of their lives in this climate. If our leaders would actually lead rather than play political games we might actually start seeing change.
But only if we give them another four years. No wonder Ben does not think that anything will get better until 2013….now I get it.
Related articles
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Use Caution When Selling REO Properties, by Phil Querin, PMAR Legal Counsel, Querin Law, LLC Q-Law.com
Image via Wikipedia By now, most Realtors® have heard the rumblings about defective bank foreclosures in Oregon and elsewhere. What you may not have heard is that these flawed foreclosures can result in potential title problems down the road.
Here’s the “Readers Digest” version of the issue: Several recent federal court cases in Oregon have chastised lenders for failing to follow the trust deed foreclosure law. This law, found inORS 86.735(1), essentially says that before a lender may foreclose, it must record all assignments of the underlying trust deed. This requirement assures that the lender purporting to currently hold the note and trust deed can show the trail of assignments back to the original bank that first made the loan.
Due to poor record keeping, many banks cannot easily locate the several assignments that occurred over the life of the trust deed. Since Oregon’s law only requires assignment as a condition to foreclosing, the reality of the requirement didn’t hit home until the foreclosure crisis was in full swing, i.e. 2008 and after.
Being unable to now comply with the successive recording requirement, the statute was frequently ignored. The result was that most foreclosures in Oregon were potentially based upon a flawed process. One recent federal case held that the failure to record intervening assignments resulted in the foreclosure being “void.” In short, a complete nullity – as if it never occurred.
Aware of this law, the Oregon title industry is considering inserting a limitation on the scope of its policy coverage in certain REO sales. The limitation would apply where the underlying foreclosure did not comply with the assignment recording requirement of ORS 86.735(1). This means that the purchaser of certain bank-owned homes may not get complete coverage under their owner’s title policy. Since many banks have not generally given any warranties in their
REO deeds, there is a risk that a buyer will have no recourse (i.e. under their deed or their title insurance policy) should someone later attack the legality of the underlying foreclosure.
Realtors® representing buyers of REO properties should keep this issue in mind. While this is not to suggest that brokers become “title sleuths,” it is to suggest that they be generally aware of the issue, and mention it to their clients, when appropriate. If necessary, clients should be told to consult their own attorney. This is the “value proposition” that a well-informed Realtor® brings to the table in all REO transactions.
©2011 Phillip C. Querin, QUERIN LAW, LLC
Visit Phil Querin’s web site for more information about Oregon Real Estate Law http://www.q-law.com
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- The Neophyte’s Publication To Locating REO Properties In a Slow Market (pro2sell.com)
- Oregon Judge Denies Foreclosure, Challenges MERS (blogs.wsj.com)
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Bank-Owned Backlog Still Building, by Carole VanSickle, Bryan Ellis Real Estate News Letter
At present, banks and lenders own more than 872,000 homes in the United States today[1]. And that number, twice the number of REOs in 2007 and set to grow by around 1 million in the years ahead as current foreclosures move forward, is starting to make a lot of real estate professionals pretty nervous. Although home sales volumes are up, many experts fear that the growing backlog of foreclosures and the necessity of getting them off the balance sheets is going to create a “vicious cycle” of depressed home values that cannot make a recovery until the foreclosure backlog is reduced – and that could take many, many years as some forecasts predict that 2 million homes will be REO properties before the bottom truly hits.
Nationwide, Moody’s analytics predicts that the foreclosure backlog could take three more years to clear and that home values are likely to fall another 5 percent by the end of 2011. However, the firm predicts a “modest rise” in prices in 2012, which has some people thinking that the situation might not be quite as bleak as it seems. However, regional analysis is going to be more important than ever before for real estate investors. For example, while hardest hit areas like Phoenix and Las Vegas are finally starting to work through their backlogs as prices get so low that buyers – both investors and would-be homeowners – can no longer resist, real estate data firm RealtyTrac recently released numbers indicating that New York’s foreclosure backlog will take more than seven years to clear[2]. Currently, it takes an average of 900 days for a property to move through the state judicial system. This means that while New York City may be, as some residents and real estate agents insist, impervious to real estate woes, the state market could suffer mightily in the years to come as those foreclosures slog through the system.
Do you think that a 5 percent drop in price in the coming year followed by “modest gains” sounds terrible, or does that just get you in the mood to buy?
Bryan Ellis Real Estate Blog
http://realestate.bryanellis.comRelated articles
- A Closer Look At The Glut Of Distressed Homes In The Pipeline (businessinsider.com)
- Housing Market’s Prospects Bleak As Foreclosed Property Backlog Grows (huffingtonpost.com)
- Banks need more lawyers for foreclosures (georgegmiller.wordpress.com)
- RealtyPartner: Our Real Estate Market Still Isn’t Looking Too Good (prweb.com)
- Mortgage Delinquencies Fall (online.wsj.com)
- U.S. Housing Market: 6 Million Final Stage Foreclosures by 2014 (Guest Post) (businessinsider.com)
- Is it cheaper to buy land from bank foreclosure or from real estate agent (wiki.answers.com)
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Oregon Real Estate Waned has just posted a new buyer: SG 16
SG16 is an experienced real estate investor looking for real estate investment opportunities in the Portland metro market. This investor is an all Cash buyer and will not need bank or lender approval to finalize any agreement made.
For more information regarding this buyer and others. Visit OregonRealEstateWanted.com at http://oregonrealestatewanted.com
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- OregonRealEstateWanted.com A Sucess Story for Buyers, by Fred Stewart, Stewart Group Realty Inc. (oregonrealestateroundtable.com)
- Real Estate Investment offers Great Wealth Margin for Every Practitioner! (dohardmoneylenders.wordpress.com)
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Report: Residential market hits double dip, by Wendy Culverwell, Portland Business Journal
The U.S. residential real estate market experienced a dreaded “double dip” in April, according to Clear Capital, as a leading index dropped below the prior, post-recession market low set in March 2009.
Truckee, Calif.-based Clear Capital monitors the residential real estate market. It found that nationwide home prices dropped 5 percent in April compared to one year ago and are down 11.5 percent over the prior nine months, a rate of decline not seen since 2008.
Clear Capital’s Home Data Index for Portland dropped 10.1 percent compared to a year ago while Seattle prices dropped 12 percent in the same period.
Clear Capital also said distressed properties, including foreclosures, represented 34.5 percent of the market in April.
Locally, distressed properties represented 31.1 percent of the Portland market and 27.4 percent of the Seattle market, it said.
“The latest data through April shows a continued increase in the proportion of distressed sales that are taking hold in markets nationwide,” said Alex Villacorta, director of research and analytics. “With more than one-third of national home sales being (distressed), market prices are being weighed down as many markets have not regained enough footing to withstand the strain.”
Clear Data said the nation’s five best markets are Charlotte, N.C., Washington D.C., Tucson, Ariz., Dallas and Philadelphia.
The five worst markets were Detroit, Hartford, Conn., Milwaukee, Wisc., Cleveland and Chicago.Read more: Report: Residential market hits double dip | Portland Business Journal
http://www.bizjournals.com/portlandWendy Culverwell
wculverwell@bizjournals.comRelated articles
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- Oregon economy climbs higher, by Suzanne Stevens, Portland Business Journal (oregonrealestateroundtable.com)
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Report Reveals Racial Disparities in Mortgage Lending, Posted in Financial News, Mortgage Rates, Refinance
Funds used for refinancing home mortgages were less available in the minority sections of major U.S. cities than in predominantly white areas after the recent housing crash, according to a new study released on Thursday. The study, compiled by a coalition of nonprofit groups across the country, revealed that refinancing in minority areas has decreased since the recession.
Mortgage Refinancing Drops 17 Percent in Minority Areas
The report, titled “Paying More for the American Dream V,” took a look at seven metropolitan areas–Boston, Charlotte, Chicago, Cleveland, Los Angeles, New York City and Rochester, N.Y.–to explore conventional mortgage refinancing.
The study, compiled by groups like California Reinvestment, the Woodstock Institute in Chicago and the Ohio Fair Lending Coalition, revealed the following:
- Refinancing in minority areas decreased by an average of 17 percent in 2009 compared with the year prior.
- Refinancing in white areas jumped by 129 percent.
- Lenders “were more than twice as likely” to deny applications for refinancing by borrowers living in minority communities than in majority white neighborhoods.
The report also found that minority borrowers were more likely to obtain a high-risk subprime mortgage loan than white borrowers, even if their credit was good.
Lenders Urged to Invest More in Low-Income Communities
Because of the inconsistency the study’s authors found in lending practices, they are concerned that there are ongoing racial disparities in mortgage lending as a whole.
Adam Rust, Director of Research at the Community Reinvestment Association of North Carolina, noted in statement “Lenders are loosening up credit in predominantly white neighborhoods, while continuing to deprive communities of color of vital refinancing needed to aid in their economic recovery.”
To aid the issue, the authors are urging lenders to make changes, including:
- Investing more in low-income communities
- Improving disclosure requirements to protect unwary borrowers
They noted that it is subprime loans that contributed largely to the housing market crash because not only were they given to those with poor credit, but income was never checked to confirm that borrowers could repay the balance.
With foreclosures expected to flow heavily in the months to come and home sales still struggling, the authors believe that expanding fair lending opportunities to all who qualify could help repair the housing industry. It’s for this reason they think changes to lending practices should be a top priority for financial institutions.
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- ‘Dual system’: Minorities lose financial ground, critics say (usatoday.com)
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Real Estate Buyers: Protect Us From Ourselves, by Tara-Nicholle Nelson, Inman.com
Over the last seven weeks we’ve taken a tour through the psyche of real estate consumers — a group that includes each of us, really, who pays for a place to live.
We have explored how the various investor desires, motivations and values illuminated in Meir Statman’s new business classic-to-be, “What Investors Really Want: Discover What Drives Investor Behavior and Make Smarter Financial Decisions,” play out in our real-life real estate decisions.
We’ve seen that just as stock market investors want to win and not lose, want status, and exercise the highly fallible — though sometimes useful — form of psychological bookkeeping known as mental accounting, so do buyers, sellers, homeowners and sometimes even renters.
For the most part, we’ve explored the substance of what we want, rather than the process of how we want it. But there are real desires we, the human race, have when it comes to the “how” around our financial decisions, real estate and otherwise; Statman calls some of them out when he declares that investors really “want education, advice and protection.”
Statman compiles meaty evidentiary proof of this declaration from facts like:
- the massive investor interest in culling investment information from the Internet;
- the fact that financial literacy is a prerequisite for achieving the prosperity most of us crave;
- the cyclical ebb and flow of cravings for the government’s protection of us — largely from ourselves — via regulation of how deeply we can leverage our own interests and how much advantage can be taken by financial predators; and
- the vast desire investors have for financial advice, including the paid advice of professional advisers, but especially the free sort they trade with each other on personal finance blogs and Internet forums.
The world of real estate has not only gone through these same trends, but I submit that the pudding in which lives the proof that consumers want information and education, advice and protection is thicker when it comes to real estate than in virtually any other sector.
To wit: the evolution of real estate on the Web. Once upon a time, homebuyers had to consult an agent, who had to consult a paper book that was delivered only to agents, just to find out which homes were for sale, their prices and other details.
In response to an ever-escalating consumer clamor for this information, multiple sites now make every detail about a home — from whether or not it’s for sale; to its price; to its number of bedrooms, bathrooms and square feet; to when it was last sold and for how much; to what it’s supposedly worth — available to anyone, anytime, anywhere, all in a couple of clicks.
Anyone can see a ground-level street view of the vast majority of homes in America, what people think of the neighborhood, even whether a home’s owners are behind on their mortgage or have received a foreclosure notice: click, click, click.
Wanna see pics of Nicolas Cage‘s house? Click here. Heard a “Real Housewife” was in foreclosure and just need to know? Click. Their gilt Rococoed, leopard-printed, McMansioned domestic world is your virtual, visual oyster (for better or for worse).
And virtually all the same sites that have made this information available in response to popular demand also feed consumer cravings for education and advice.
Most offer basic briefings on various real estate issues; virtually all of them offer education/advice hybrids by offering connections to real estate brokers and agents and discussion communities in which anyone can ask a question and get a first, second and 44th opinion from local agents not-so-covertly vying for (a) the asker’s business, and/or (b) the opportunity to exhibit local knowledge and professional expertise — not just to the asker, but to prospective clients searching for them or the subject matter on the Web in perpetuity.
(And, lest I forget, those who ask their urgent real estate questions on these communities will frequently get an answer or so from another consumer — usually a cranky, anonymous one whose advice generally runs along one of three veins: (a) agents and mortgage brokers suck, (b) homeownership sucks, and/or (c) the government sucks. Not so nuanced, and not so helpful, but a clear case in point that some consumers not only want advice — they also want to give it.)
Even offline, it’s not at all bizarre for today’s home sellers to interview three or four prospective listing agents to gather advice and opinions, and every buyer’s broker has heard a client recount the real estate advice they have been given by their hairdresser, veterinarian, barista or ob-gyn.
Education, information, advice — consumer cravings for these are clear — but protection is a little more complicated. In “What Investors Really Want,” Statman writes: “Our desire for paternalistic protection from ourselves and others increases when we experience the sad consequences of our own behavior or the behavior of others.”
It is on this topic that Statman makes one of only a handful of “What Investors Really Want” references to real estate, making the hindsight observation that regulation limiting homeowners’ ability to leverage their own homes might have made sense, given the woeful consequences of overleveraging (i.e., the foreclosure crisis which is currently at four years and running).
Translation: We don’t want the government to limit our ability to mortgage our homes when values are skyrocketing, because we want to be able to max out the house we can buy for the money.
But when those adjustable-rate mortgages (ARMs) start adjusting, our maxed-out neighbors start walking away and the resulting foreclosures cause property values to plummet, while our craving for government protection from predatory lenders, liar’s loans and confusing boilerplate loan docs takes a steep uptick.
Do real estate consumers crave information, education and advice just as much — maybe even more — than traded-asset investors? Absolutely. And just like stock investors, housing consumers also want government protection from lenders, mortgage brokers, agents and themselves, after their own decisions have spanked them with the consequences of a largely unregulated mortgage market. What remains to be seen is how long the desire for protection will last.
I suspect it will last as long as home values are low and rates of foreclosure and negative equity are high. But I hope that the lessons from this national tragedy — massive losses in wealth, jobs and families’ homes and health — including the need for more intense mortgage market regulation, do not disappear when property values start to make a comeback.
Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.
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Portland Disparity Study Delivers Mixed Results, by Wendy Culverwell, Portland Business Journal
Portland earned mixed marks on a report grading its efforts to include firms owned by women and minorities in its public works projects.
The widely anticipated “disparity study” by Denver-based BBC Research and Consulting landed at city offices last week. Federal court rulings prohibit government agencies from establishing goals for disadvantaged businesses unless they first conduct “disparity” studies to determine if a gap exists. Portland’s last disparity study was released in 1995.
BBC evaluated approximately 9,000 contracts issued or sponsored by the city and the Portland Development Commission between 2004 and 2009. The study cost $1 million, with $350,000 from the PDC and $650,000 from the city.
According to the report, Portland successfully used women- and minority-owned firms for both construction and professional services. BBC reported no disparities in any of the four primary categories.
The PDC, meanwhile, passed in three categories and failed in five. The report found that the PDC made good use of disadvantaged firms on projects it owned in 2004 to 2009, but generally failed to promote such firms on projects it sponsored by contributing funds but not oversight.
The development commission anticipated that its “sponsored” projects would be a weakness one year ago when it changed its contracting policy to require any partner to meet its diversity goal if it uses PDC money on a construction project.
The development commission won passing marks in the use of woman-owned construction firms and use of minority- and woman-owned “personal services” firms, which are generally architectural and engineering related. It failed in the use of minority-owned construction firms, use of minority-owned personal services firms and use of woman-owned personal services firms.
Results of the report will guide the city and development commission’s efforts to include traditionally disadvantaged firms in its public works projects.
A copy of the report is available for view or comment on the city’s website.
Read more: Portland disparity study delivers mixed results | Portland Business Journal
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SBA opens 504 refinancing to more firms, by Kent Hoover, Portland Business Journal
The U.S. Small Business Administration will allow more businesses to refinance their commercial real mortgages through its 504 loan program.
The SBA initially restricted this new refinancing option to small businesses that faced balloon payments on their mortgages before Dec. 31, 2012. Beginning April 6, it will open the 504 refinancing option to businesses with balloon payments due after that date.
“With the collapse of the real estate bubble, many small business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,” SBA Administrator Karen Mills said. “SBA’s temporary 504 refinancing program was first made available to those small businesses with the most immediate need. Today’s step opens this critical assistance to more small businesses, giving them the opportunity to restructure their debt and free up capital that will be essential to keeping their doors open and also their future ability to grow and create jobs.”
The Small Business Jobs Act, which was enacted last September, allowed the 504 program to be used to refinance existing loans on owner-occupied commercial real estate through September 2012. To be eligible for refinancing, the mortgage must be at least two years old, and the business must be current on their payments for the past 12 months. Borrowers can refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower.
The SBA’s 504 loans are used to finance fixed assets, primarily real estate. Typically, a 504 project includes a first mortgage from a private-second lender that covers 50 percent of the cost, an SBA-guaranteed second mortgage from a certified development company that covers 40 percent of the cost, and 10 percent equity from the small business borrower.
Read more: SBA opens 504 refinancing to more firms | Portland Business Journal
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OregonRealEstateWanted.com A Sucess Story for Buyers, by Fred Stewart, Stewart Group Realty Inc.
I think the success of the OregonRealEstateWanted.com site is due to the massive amount people that are involved in the Oregon Real Estate market right now. The difference between their involvement today compared to 5 years ago is there are more people looking to sell real estate than there are looking to buy. Buyers have so many opportunities to consider that it is sometimes difficult for them to settle on exactly the right property to fit within their dreams and goals. Sellers have a problem making sure their property is exposed to buyers that could be a good fit for their opportunity. There is just so much to look at that often times their buyer has chosen something else before they even had a chance to consider their property.
The issue might be how opportunities are presented to buyers and where they come from. In some cases the best way for an opportunity to be identified is after the seller has had a chance to learn what the buyer is looking for and if they see a fit with the real estate they are selling. Only then does the seller reach out to the buyer to explore any advantage in developing a deal. In this context the buyer is looking at properties from a wide range of areas with in the market. As real estate brokers and private property owners alike may present opportunities. In some cases deals have been developed on properties that were not formally on the market.
The next steps for OregonRealEstateWanted.com are to list people looking to lease or rent commercial and residential real estate. The plan is to start listing people that are looking for lease hold or month to month rental relationships on the site by June 1st., 2011..If you are looking to buy real estate fin the Oregon market to live in or as an investment. Contact Fred Stewart of Stewart Group Realty for a private one on one consultation and possible listing on the site. All information shared with Mr. Stewart is confidential and there is no charge unless the real estate you are looking for is found.
Oregon Real Estate Wanted.com
http://oregonrealestatewanted.comFred Stewart
Stewart Group Realty Inc.
info@sgrealty.us
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Broker Compensation Rule Delay Not Good for Business, by Michael Dolan, Broker Pro Mortgage
Some mortgage brokers were happy Friday that a law suit against a Federal Reserve rule, scheduled to take effect that day, had been stayed 5 days. I wasn’t. The rule controlled how to price mortgages. Here’s what I posted on a major mortgage broker discussion site (It got noticed):
This stay is terrible news for our industry because it further delays necessary clean up. I agree the new compensation rule itself is counterproductive and redundant.
But that’s not our biggest problem. The first problem is that exploitive and greedy hiring practices caused the need for government intervention. Too many broker companies treat employed LOs [Loan Originators] like crap: no training, no decent pay schedule. This exploitation in turn pressured LOs into decisions that were not in the interest of homeowners.
Second, our industry representation is ineffective and even embarrassing. Suing is the tactic of those who do not understand how the system works and cannot produce effective compromise. Industry leaders have responded like children who have lost a candy bar. They go to Washington, DC and are not professional enough to wear a suit and tie. They don’t even realize they are announcing to the world they are untutored rubes. Then we hear nutty over-statements like “we have the best lawyers in the country.” It wasn’t until about the last month they realized that complaining about their jobs is bad politics. So – too late – they began to contend the new compensation rule was bad for homeowners but never really made a compelling argument.
Today’s result: confusion. You know what, the rule is bad. But it’s not that tough to figure out. “Oh my God! How can an industry survive if you have to pay branch managers a salary?” Complaining about how the rule hurts your business makes you seem greedy and self centered. Look around. Who agrees with industry groups? Who is with us? Nobody!
After five losing seasons, you fire the coach. The current professional organizations and the people running them need to step aside and make way for educated professionals who can work with regulators, build coalitions, and explain what we are doing for homeowners.
Michael Dolan
BrokerPro Mortgage, LLC
1001 SW 5th Ave #1100
Portland, OR 97204503-895-5428 (NEW)
425-998-0191
800-843-9010
mobile: 503-287-4876http://www.BrokerProMortgage.com
License # 114972
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OregonRealEstateWanted.com: New Buyer Posting
New buyer (SG14) has been posted on the OregonRealEstateWanted.com web site. This buyer is an investor and they are looking for residential multifamily opprotunities under $200,000 in the Portland Metro area. Buyer is looking for seller financing opportunities only. To learn more about this buyer and others that may be looking for real estate you have for sale. Please visit OregonRealEstateWanted.com
Oregon Real Estate Wanted
http://oregonrealestatewanted.comFred Stewart
Stewart Group Realty Inc.
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An Old Idea is New Again: Second Homes in Oregon , By Fred Stewart, Stewart Group Realty Inc.
2011 may be the year buyers start considering second homes again. Our mountains, high desert and coastlines have long been considered legendary vacation destinations. Both urban dwelling Oregonians and people from out of state go home from visits to these places with a dream of returning as often as possible.
Owning a second home is a good idea – one that makes family life more enjoyable. It is the dream of many to finally have that special getaway. With the retraction of home values down to levels not seen in nearly 10 years, coupled with still historically low interest rates, this dream may once again be an opportunity whose time has come.
But of course, there is the flip side to this rosy picture: it has become increasingly difficult to obtain financing. And the barriers are even higher for second homes then they are for people seeking to finance their primary residence. Lenders and banks have taken a lot of losses over the past few years. A significant portion of these losses is due to the second home market that developed between 2003 and 2006. Because of this, expect a lot more work to get financing then what you may have experienced in the past. It is important that you work closely with a loan officer that has a lot of experience in residential lending and is working with a Mortgage Banker or Bank. However, you may have found a truly awesome deal and still be unable to prove yourself sufficiently to a lender. It is time to think about this in new ways.
Seller financing options such as land sales contracts and lease options should not be ignored. These options will sometimes be the only options that will allow a successful transaction to occur in the present financial climate. Do not hesitate to begin by speaking with a loan officer and exploring the possibility of traditional financing. At the same time, don’t waste precious time you begin to feel as if you are not making satisfactory progress. The “miracles” that good loan officers could pull off for borrowers in the past, are simply not happening these days.
If you have exhausted the bank loan route unsuccessfully, educate yourself about the various seller finance options. When you do reach mutually acceptable terms with your seller, be sure to draft an agreement that would last at least 3 to 5 years, if possible. It will take at least that long for lending to return to some normalcy and for you, the buyer, to develop a financial profile that would be encouraging for a lender or bank to work with them. Here your favorite loan officer can be of great assistance, and work with you during that time period to assist you in understanding and attaining eligibility for bank financing. Three to 5 years of good credit, stable employment and a healthy dedication to making the contract and mortgage payments on time will show the lender that you have the economic and character resources to deserve the credit for the loan. The three C’s (Capability, Creditworthiness and Character) will always be the basis of bank lending. What is different now is the stringency applied to each of these criteria.
As always when looking to buy an investment property or a second home you should talk to your tax and financial advisors and get their opinion on how this will affect your tax exposure and your financial planning. A real estate purchase properly structured and managed will improve your financial standing. A second home can be a wonderful and satisfying improvement on your lifestyle.
Fred Stewart
Stewart Group Realty Inc.
http://www.sgrealty.us
info@sgrealty.us
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OregonLandSalesContract.com: New Real Estate and Home Buyer Listings
New Listings on OregonLandSalesContract in both the Real Estate listings and buyer listings sections. OregonLandSalesContract is a web site dedicated to marketing real estate in which the seller is offering terms and buyers that are looking for seller financing opportunities.
OregonLandSalesContract.com
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OREGON REAL ESTATE ROUND TABLE 