Fannies supply of foreclosed homes keeps growing. The First Look program is designed to help owner occupants buy homes. Its a new program aimed at toward stabilizing neighborhoods and building stronger communities in tough times. The idea is to give the owner occupant an advantage over the investor. generally, investors are professionals and cash heavy. They get to the property first and can buy in full. Fannie and Freddie have launched initiatives that give an edge to the owner who will occupy the home, thereby helping to preserve the neighborhood. With First Look, only offers from owner occupants and buyers using public funds are considered during the first 15 days a property is on the market. Offers from investors will be considered only after the first 15 days have passed.
Direct from the Fannie Mae web site:
1. A First Look at properties for buyers using public funds
2. A reserved contract period that gives buyers a chance to renegotiate after obtaining an appraisal
3. An initiative designed to work with HUDs Neighborhood Stabilization Program (NSP)
4. An earnest money waiver for public entities and a discount for individuals (can be as little as $500 for an individual using NSP funds)
5. Extra time for due diligence and closing
6. Freddie Mac has a similar pilot program.
For more information about Fannie Mae’s First Look initiative contact publicentity_reosales@fanniemae.com or go to the Fannie press release
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November 29, 2009
November 28, 2009
Citigroup Suggests Mortgage Debt Forgiveness
Nearly one in four U.S. borrowers owe more on their mortgage than their home is worth, indicating that the housing recovery could see another wave of defaults. 23% of mortgage holders, were underwater in the third quarter, and 5.3 million have mortgages that are 20% higher than the value of their home since the recession began. Analysts expect prices to dip again this winter as foreclosures increase and economic growth remains modest. The Wall Street Journal reports.
Its not a new idea and many have always clamored for the banks to take some repsonsibility for loose lending practices that helped fuel the boom. But now it seems that a major institution is on board and will spearhead a push for mortgage debt foregivness.
Citigroups quarterly reports on mortgage borrowers
As unemployment rises, more borrowers need principal forgiveness on their mortgages, not just restructured loans, Citigroup Inc.'s mortgage chief said. To date, Citigroup helped 130,000 homeowners with $20 billion in mortgages outstanding avoid potential foreclosure last quarter. But that number increased 20% from the second quarter. The sub prime debacle is behind us, the culprit now is unemployment.
Unemployment
The Main Cause of Delinquencies
The main problem of the mortgage industry changes from house-price depreciation to unemployment, the mortgage market needs more programs where there is principal reduction for borrowers with negative equity in their home, as opposed to just a loan restructure, Mr. Das said. (Via Wall street Journal).
Loan mods alone are not enough to avoid another tsunami of foreclosures. The housing recovery's momentum has slowed, and it seems likely that house prices will now resume their fall. Re-default rates on loans that had already been modified in the quarter were nearly 39 percent, up 10 percent from the second quarter. High unemployment coupled with a loss of home equity are too big a burden for many home owners and the temptation to walk away, may begin to look like good business sense.
Foreclosures initiated in the third quarter rose about 10% from the second quarter but fell about 11% from a year earlier. Completed foreclosures fell less than 1% from the second quarter and about 48% from a year earlier. Things appear to be moderating, although I dont think Citigroup is addressing the Alt A recasts, which are expected to add to the problem, in a big way, beginning this year and into 2012.
Citigroup Speaks Out
Citi proposes new programs to forstall impending foreclosures. Recognizing that existing programs are not enough, the bank wants to reduce the principal owed and to bring this down to a number homeowners could cover. In return for forgivness of some debt, Citi wants to share any potential upside. Banks step up and take a hit along with the home owner, home owner gets to stay in the house, Home stays off the market helping home prices stabilize and bank gets equity share for the effort. Having the lenders in an equity share position with home owners is a solid idea.
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November 27, 2009
Foreign Real Estate Investors Return To The Market
The 17th annual survey shows strong Interest In US Real Estate.
1. Foreign real estate lenders say they plan to increase lending by 58% in the U.S. in 2009.2. Equity investors plan to increase investment activity by 40 percent globally and by 73% in the U.S. according to the results of the 17th annual survey
Preferences
D.C. trumps New York as the top global city for foreign investment. London and New York were second and third position for foreign investment interest. Five of the top ten cities were American and the U.S. was ranked as the country with the most opportunity for capital appreciation.
US Real Estate Trends
Our system certainly can surprise, but politically, we are very stable. There is a great deal of faith in our ability to adjust and change. AFIRE members surveyed find the U.S. continues to provide both the most stable and secure real estate investment environment and the best opportunity for capital appreciation.
This year, foreign investors are eying the multi family sector, followed by offices, industrial, retail, and hotel properties. US property is showing signs of an approaching price equilibrium and the dollars decline has made real estate even cheaper for foreign investors. Fed assurances that interest rates will remain low until a full blown recovery virtually assures an inexpensive dollar and once in a generation opportunity for foreign investment.
NAR reports International investors bought 154,000 homes and condos in the 12-month period ending in May, down nearly 10% from 170,000 for the same period a year earlier.But Since June, the dollar has tumbled by 9 to 11% against currencies like the Japanese yen, the Euro and the Canadian dollar. Florida leads the country accounting for 25% of foreign purchases, followed by California, Texas, and Arizona.(via AFIRE)
Green Matters
When asked to what extent a building’s green attributes influenced their decision to purchase a property, 11 percent said significantly so, and 60 percent said somewhat so. In almost the exact same percentages, investors said that green attributes were worth a greater rental premium. This was the first survey in which these two questions were asked. (Via AFIRE)
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Freddie MAc Weekly Update
30 Year Fixed Rate Falls Below 5 Percent
30-year fixed-rate mortgage: Averaged 4.78 percent with an average 0.7 point for the week ending November 25, 2009, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.97 percent. The 30-year has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent.
The 15-year fixed-rate mortgage: Averaged 4.29 percent with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.18 percent this week, with an average 0.6 point, down from last week when it averaged 4.25 percent . A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.
One-year Treasury-indexed ARMs: Average 0.7 point, unchanged from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent . The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent
Freddie Sayz
Long term mortgage rates eased for the fourth consecutive week to record levels, said Frank Nothaft, Freddie Mac vice president and chief economist. Interest rates for 30 year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this years peak set in mid June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage. House prices are slowly beginning to firm now.
For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. [PDF] Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller® 20-city house price indexes
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Mortgage Bankers Weekly Update
Mortgage Bankers Association for the week of 11/25/2009
Market Composite Index: (loan application volume) decreased 4.5 percent on a seasonally adjusted basis from one week earlier.Refinance Index: decreased 9.5 percent from the previous week
Purchase Index: increased 9.6 percent from one week earlier.
Refinance Share of Mortgage Activity: decreased to 71.7 percent of total applications from 74.6 percent the previous week.
increased to 5.3 percent from 5.1 percent of total applications from the previous week.
ARM Refinance Activity: decreased to 5.4 percent from 5.5 percent of total applications from the previous week.
MBA outlook: (Excerpted from mbaa.org)
In summary the MBAA sees another year of high employment, rising home sales and prices beginning to stabilize. But continued weakness in the job market and excess supply and shadow inventory will slow any recovery in the housing market.
The Federal Reserve will extend their agency MBS purchase program through the end of the first quarter of 2010. However, Fed and Treasury purchases have accounted for the vast majority of all new issuance in this sector in recent months, and rates will increase when the Fed steps out of the market completely.
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November 21, 2009
Freddie Mac Weekly Update
30 Year Fixed Rate Falls Below 5 Percent
30-year fixed-rate mortgage: Averaged 4.83 percent with an average 0.7 point for the week ending November 19, 2009, down from last week when it averaged 4.91 percent. Last year at this time, the 30-year FRM averaged 6.04 percent.
The 15-year fixed-rate mortgage: Averaged 4.32 percent with an average 0.6 point, down from last week when it averaged 4.36 percent. A year ago at this time, the 15-year FRM averaged 5.73 percent.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 4.25 percent this week, with an average 0.6 point, down from last week when it averaged 4.29 percent. A year ago, the 5-year ARM averaged 5.87 percent.
One-year Treasury-indexed ARMs: Averaged 4.35 percent this week with an average 0.6 point, down from last week when it averaged 4.46 percent. At this time last year, the 1-year ARM averaged 5.29 percent.
Freddie Sayz
Interest rate on 30 year fixed-rate mortgage loans fell for the third consecutive week to the lowest since the week ending May 21st, while 15 year fixed rates were the lowest since our records began in 1991, said Frank Nothaft, Freddie Mac vice president and chief economist. Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan. Moreover, for the fourth consecutive quarter, more than 95 percent of prime borrowers who originally had an ARM selected a conventional fixed rate mortgage in the third quarter of this year.
Meanwhile, new home building showed some weakness in recent months. Residential construction eased 10.6 percent (annualized) between September and October, largely driven by a 33.3 percent decline in new condominium and apartment buildings and represented the slowest pace since records began in 1959. And homebuilder confidence in November remained a relatively low level, according to the National Association of Home Builders
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Mortgage Bankers weekly Update
Mortgage Bankers Association for the week of November 18, 2009
Market Composite Index: (loan application volume) decreased 2.5 percent on a seasonally adjusted basis from one week earlier. .Refinance Index: decreased 1.4 percent from the previous week
Purchase Index: decreased 7.9 percent compared with the previous week and was 14.7 percent lower than the same week one year ago.
Refinance Share of Mortgage Activity: increased to 72.9 percent of total applications from 71.5 percent the previous week. This refinance share is the highest share since the week ending May 15, 2009
ARM Refinance Activity: decreased to 5.4 percent from 5.5 percent of total applications from the previous week.
MBA outlook: (Excerpted from mbaa.org) The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009.
Its job loss that is now hurting people. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. A perfect observation by Jay Brinkmann, MBAs Chief Economist.
According to the MBAA.org site: T he outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve. First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace. Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates.
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