Monday, March 10, 2008

Foreclosures hit an all time high

"None of these foreclosed houses is going to disappear. After a foreclosure, one family moves out, and another moves in. We see the sad faces of the people moving out, but we don't as often see the happy faces of the new homeowners moving in. Nevertheless, those happy faces are out there, and we should not discount them." (Slate, Mar. 3rd)

Foreclosure Data

U.S. Mortgage Foreclosures Rise as Owners 'Give Up'. "Mortgage Bankers Association: U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased. New foreclosures jumped to 0.83% of all home loans in Q4'07 from 0.54% a year earlier. Late payments rose to a 23-year high. Jay Brinkmann, MBA VP of research and economics: About 40% of all foreclosures are homeowners with prime or subprime loans who couldn't make their payments before the reset. Another 23% are borrowers who received some form of loan modification, typically a freezing or reduction of their rate, and then default." (Bloomberg, Mar. 6th

Report: Minorities Hit by Foreclosures. "Report released Thursday by an alliance of policy, research and advocacy organizations: Subprime lenders that went out of business with the industry's collapse targeted minority neighborhoods, leaving them to struggle disproportionately with foreclosures and crumbling home values. These companies' high-risk loans made up 20% of all loans in predominantly minority communities, compared with 4% of total loans in mostly white areas... The study analyzed the geographic operating patterns of 35 high-risk lenders that... went bankrupt, were closed or sold in 2007 [and] focused on lending to minority urban markets in New York, Los Angeles, Chicago, Boston, Cleveland, Charlotte, N.C., and Rochester, N.Y." (AP via, Mar. 6th)

Big Foreclosures Close Quietly. California: "A $74 million loan to Irvine-based developer SunCal Cos. for a major housing project in Shafter was foreclosed on Wednesday morning at a public auction... Opening bids for the site started at $10 million. No one made an offer, so the property went back to Lennar (LEN). Two other would-be residential development sites were also foreclosed on at Wednesday’s auction. A pair of Wasco properties... went back to lender Investment Grade Loans Inc. after no one answered the opening bid call at $100,000 apiece. About 77 acres at Gromer and Magnolia avenues and 75 acres near Palm and Filburn avenues carried about $4.2M in debt." (Bakersfield Californian, Mar. 5th)

Bob Toll: Issue is Confidence. Toll Brothers CEO Robert Toll: "Federal officials may be overconfident that the level of foreclosures is manageable. He said officials have told him privately that of the $1.5 trillion in mortgages that have gone bad, only $300 billion will ultimately foreclosure. "They tell me that $300 billion is a manageable number, but my opinion is that if we don't have some serious intervention on the part of the Treasury, Federal Reserve, and Congress, the risk could be greater than we recognize," Toll concluded." (Builder Online, Mar .5th)

Bernanke Call for Mortgage Forgiveness Puts Pressure on Paulson. "Treasury Secretary Henry Paulson may need to revise his strategy for stemming record U.S. home foreclosures after Federal Reserve Chairman Ben S. Bernanke urged lenders to forgive portions of some loans. Bernanke's call, in a speech yesterday to bankers in Orlando, Florida, went beyond a Paulson-backed plan that focuses on renegotiating interest rates. With his remarks, the Fed chief joined the heads of the Office of Thrift Supervision and Federal Deposit Insurance Corp. and congressional Democrats in proposing stronger actions than Paulson to alleviate the worst housing recession in a quarter century." (Bloomberg, Mar. 5th)

Foreclosure-Proof Homeowners. Florida: "There is currently an 8-10 month wait to get a court date to have a foreclosure filing heard in Dade and Broward counties. Bankers have non-performing loans on their books to the best heeled borrowers in multi-million dollar amounts with no immediate means for recovery; with a non-secured second mortgage in place, there is no possibility for a "short sale" that will satisfy all of the borrower's debt... Banks do not want to spend the $50,000 required to... foreclosure and clear the title -- only to put the house back on the market for a deeper loss afterwards...These [homeowners] are... living cost free!" (Barry Ritholtz in Seeking Alpha, Mar. 5th)

Bernanke Urges Banks to Forgive Portion of Mortgages. "Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting. "Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said Tuesday. Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.'' (Bloomberg, Mar. 4th)

NYC Foreclosures On The Rise. "Manhattan Real Estate has been rock solid throughout the entire Housing mess. But I was a little surprised to see how much pressure the rest of the city has been under. Chart: Foreclosures, 5 Boroughs NYC." (Barry Ritholtz in Seeking Alpha, Mar. 4th)

Foreclosure Storm Forces Court To Extend Hours In St. Lucie County. The civil division of the St. Lucie County Circuit Court is adding a night shift to handle a huge backlog of home foreclosure filings... Clerk of Courts Edwin M. Fry Jr.: "The case load has become just horrendous... Going back to 2005, we typically would have 40 to 45 foreclosures filed in a month. This January, we had 715 foreclosure cases filed. It's just killing us." Fry said staffers in the circuit court's civil division have been working Saturdays for the past four months to try to get on top of the case load, "but we can't keep up." (TC Palm, Mar. 3rd)

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Friday, March 7, 2008

When will the Homebuilding and Housing Industry Turnaround?

From the Chicago tribune today:

The housing industry could see a turnaround before the end of this year, but only if Congress takes action beyond the current economic stimulus plan, and the credit markets stabilize, the head of the National Association of Home Builders said here Friday.Overhaul of federal agencies responsible for the housing industry has been on hold for five years, and action is needed quickly, said Jerry Howard, CEO of the builders' group."There has been a lot of finger-pointing, but action has been too slow," he said. "Current regulation has been dysfunctional and has been too slow to help the industry."Action is needed on an overhaul of the Federal Housing Authority and on regulation of Fannie Mae and Freddie Mac, the two private, government-backed firms that provide a lion's share of mortgage financing, according to Howard.He said a much-needed element for turning around the housing industry would be a tax credit of perhaps $10,000 for buyers of a new home. This could be aimed at first-time buyers, or it could be more broadly based, Howard said. In some cases, the tax credit could be as much as $15,000.A similar step taken in 1975-1976, during the administration of President Gerald Ford, helped the country out of a recession at that time, he said. That tax credit was for $1,000. Howard spoke with members of the Tribune's editorial board, telling them that the housing industry is in a recession that is affecting all parts of the economy."Home building traditionally is the first sector to go into a recession, but it is also the first to come out," he said.The housing industry could recover before the end of 2008, provided that the rest of the economy doesn't tumble into a recession, Howard said. Currently, builders are faced with about 10 months worth of unsold homes."The housing downturn is affecting lumber mills and a wide range of manufacturers, and the situation for builders is dire," Howard said. Part of the problem, admittedly, was caused by overbuilding, he added.But additional blame should go to poor regulation of mortgage lenders, some of whom made predatory loans that have tumbled into foreclosure, Howard said. Additional blame should go to appraisers who overvalued properties, and mortgage brokers, who encouraged consumers to take inappopriate loans. As part of the current government stimulus plan, conforming loan limits for mortgages were raised above $417,000 for houses in California, Florida and other high-price areas. But the limit was unchanged for the Chicago area. That is hurting buyers who are looking at homes priced in a range of $500,000 or more, analysts said.Locally, sales of new homes have fallen by about two-thirds, "but by summer we will be through the worst of the situation here," said Peter Schwartz, chief executive officer of the Home Builders Association of Greater Chicago, who also attended the session.A harsh winter and late spring have hurt sales, he said, but builders are poised for a rebound.