New Scheme Preys on Desperate Homeowners

New Scheme Preys on Desperate Homeowners

The schemes take various forms and often involve promises to distressed homeowners of cash upfront, free monthly rent and a chance to retain their houses in the long run. But in the process, someone else takes over the deed, borrows as much as possible against the value of the house and pockets the cash. And, almost always, the homeowners still end up losing their homes.

There are no nationwide numbers on this common fraud, known as equity stripping, but it has turned up in almost every state. Seven states have passed laws to try to stop it. Still, with foreclosure rates rising rapidly, it will be a growing problem, consumer advocates say.

New York Times

• 
  

Steps to Modify Loans and Avert Foreclosures Draw Controversy
By Lingling Wei, Ruth Simon and James R. Hagerty

Foreclosures are rising fast partly because lenders in recent years rushed to make no-money-down loans to people with weak credit records and didn't always verify their income. At the same time, the decline in housing prices in much of the country makes it hard for borrowers who fall behind to sell their homes for enough money to pay off the loan.

When borrowers can't keep up, lenders typically consider whether it makes sense to offer a loan modification. Such workout deals, known as "mods," often involve lowering the interest rate or stretching out the term. Lenders have used mods for years, but the practice is expected to proliferate as defaults rise.

Wall Street Journal

• 
  

Tips From a Foreclosure Investor
By Off The Shelf

There's never been quite so many opportunities for individual investors to buy foreclosures. There are just so many of them. Before, the market was chiefly controlled by good old boy networks, through the banks' brokers.
All kinds of things, inside and out. Look at the doors, windows, roof, concrete -- everything. Properties that are in foreclosure aren't always in great condition. After all, the owners couldn't afford the mortgage payments. They probably couldn't pay for maintenance either. It's important to have a thorough, professional home inspection before buying. But if that's not possible, then you should at least inspect the outside of the property yourself -- all four sides.

Washington Post

Harvard Study released its annual State of the Nation's Housing report for 2007.
Too soon to look for housing market bottom

While it states that the longer-term outlook for housing is (more) upbeat, the length and depth of the current correction will depend on the course of employment growth and interest rates, as well as the speed with which builders pare down excess supply. The influx of immigrants and their children has and should continue to drive household growth between 2005 and 2015 and, with the enormous increase in household wealth over the past 20 years, healthy income growth will help propel residential spending to new heights.

Mortgage News Daily

• 
  

Too soon to look for housing market bottom

The report on new home sales mirrored a report Monday on existing home sales, which showed a 0.3 percent drop in in May nationwide. The median price of an existing home in May dropped 2.1 percent from a year ago to $223,700 — the 10th consecutive month of year-over-year declines, according to the National Association of Realtors. Inventories of unsold homes are at their highest level in 15 years.

Monday’s report also came with a gloomier outlook: The real estate trade group now expects existing home sales to fall 4.6 percent this year, worse than its previous forecast of a 2.9 percent drop. And the median price for a home is expected to fall by 1.3 percent this year — the first annual decline on record.

On top of rising inventories of unsold homes and a wave of foreclosures on bad loans, the housing market is now feeling the impact of a recent jump in mortgage interest rates.

"That will lead to another down leg in housing in the next two to three months and put more pressure on home sales and home prices in the coming month," said Thomas Higgins, chief economist at the investment management firm Payden & Rygel.

MSNBC

• 
  

FOMC seen sitting tight on monetary policy
By Greg Robb

The nation's economy is looking pretty good and inflation pressures are easing, but don't look for any cigars or champagne from the Federal Reserve at the end of their two-day meeting Thursday.
Instead, the central bank will be cautious, preferring to sit tight and make only minor changes to its statement, analysts said.
The Fed is widely expected to hold its federal funds target rate at 5.25% for the eighth straight meeting, spanning one year.

MarketWatch

• 
  

Know Which 'Junk Fees' to Trash

Sandy Gadow, author of "The Complete Guide to Your Real Estate Closing" offers this advice:

When you applied for your mortgage, the bank gave you a good-faith estimate, which outlined costs you would incur. Let's look at the other fees typically disclosed here.

The first category of charges listed are those items payable in connection with your loan. These may include an origination fee, points, appraisal fee, credit-report fee, mortgage-broker fee, underwriting fee, processing fee, courier fee and wire transfer fee. An origination fee and points are typically a set fee that you have agreed to pay to obtain your loan. It may be a percentage of the loan amount, say 1 percent.

An appraisal fee and a credit-report fee are typically not negotiable, as the lender or your mortgage broker will order these. Even though you may have an appraiser who will offer you a reduced fee to perform the appraisal, the lender may require that the appraisal be done by one of its "approved" appraisers. If you do, however, have an appraiser that is considerably less costly than the lender's, your appraiser can typically become certified by your lender by simply providing the lender with certain licensing certifications.

The mortgage-broker fee listed on the good-faith-estimate form is negotiable. The lender's inspection, underwriting and processing fees may be somewhat negotiable, but many lenders stay fairly firm on these fees.

Courier and wire-transfer fees are typically charged for transferring loan documents to the escrow closing company and wiring the loan proceeds to the closing officer. You may ask that these be reduced or waived. Ask if your lender has the ability to transfer the documents electronically. Verify that the closing agent has not marked up these fees.

Washington Post

Housing industry still looking for the bottom

Housing industry still looking for the bottom

“I still think we're not at the bottom in terms of housing construction,” said Mark Vitner, a senior economist at Wachovia Corp. “Sales have to bottom out first. ... We haven't seen that yet. And then construction starts will probably bottom out six to nine months after that."

Hardest hit have been regions that were enjoying the most rapid growth during the height of the housing boom, including California, Florida, Arizona and Nevada. Homebuilding showed signs of strength some Northeast and Midwest market. But homebuilders like Robert Toll, CEO of Toll Brothers, say it’s too soon to say whether the industry has hit bottom.

MSNBC

• 
  

Weak housing drives down Toll profits
By Ilaina Jonas

NEW YORK (Reuters) - Toll Brothers Inc. (TOL.N: Quote, Profile, Research) on Thursday said the weak U.S. housing market drove down its quarterly profit 67 percent after write-downs for lower land values, and the luxury home builder lowered its forecast.

U.S. housing demand has dropped over the course of the year on higher prices and interest rates, and Toll said it could not yet see a rebound going into the industry's spring selling season.

Reuters

• 
  

Home Foreclosures Hit Fresh High And May Continue to Increase
By Damian Paletta and James R. Hagerty

A record number of homeowners entered the foreclosure process during the first quarter, topping the previous high set in the final quarter of 2006 and reflecting continued stress on the jittery housing market, according to a report released by the Mortgage Bankers Association.

The trade group's chief economist, Doug Duncan, predicted that delinquencies would likely rise, peaking later in the year. He also said rising foreclosures probably wouldn't peak until next year. "Our view is that we will probably see modest increases in delinquencies and foreclosures for the next couple of quarters," Mr. Duncan said.

Borrowers are having more trouble meeting payments as house prices flatten or decline in much of the country and as many loans that had low introductory rates reset to sharply higher ones.

In a research note, economists at Goldman Sachs noted that the first-quarter data reported yesterday don't fully reflect the effects of tighter credit, which started taking hold late in the quarter. The figures also don't reflect the recent surge in interest rates, which will push up costs for borrowers with adjustable-rate mortgages. "So future reports are likely to show further deterioration, perhaps at a faster rate," the Goldman report said.

Wall Street Journal

Real Estate Markets May Not Be that Dire

Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn

Lawrence Yun, NAR senior economist, said the market is relatively soft. “Overall housing levels are historically strong, but sales remain sluggish compared to the recent boom,” he said. “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year. It’s important to keep in mind that all real estate is local, and many markets are expected to have higher sales and strengthening prices during the second half of this year.”

Existing-home sales are projected to total 6.18 million in 2007 and 6.41 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 860,000 this year and 901,000 in 2008, down from 1.05 million last year. Housing starts are likely to total 1.43 million units in 2007 and 1.49 million next year, below the 1.80 million recorded in 2006.

The national median existing-home price should ease by 1.3 percent to $219,100 in 2007 before rising 1.7 percent next year. The median new-home price will probably fall 2.3 percent to $240,800 this year, and then grow by 2.6 percent in 2008. “We continue to experience a temporary distortion in comparing median existing-home prices,” Yun said. “Because the sales volume has shifted from many high-cost areas to moderately priced markets, we’re not getting a true apples-to-apples comparison. When you look at other measures, such as this week’s price index from Freddie Mac which is based on repeat sales, overall home prices are rising slowly.”

National Association of Realtors

• 
  

MBA Delinquency Data Not As Dire As RealtyTrac Reports

On Tuesday RealtyTrac released some pretty scary numbers relating to foreclosures. According to its data, RealtyTrac said, more than 176,000 people

got foreclosure notices in May, an increase of 90 percent since the same month one year ago and the highest figure ever recorded in their monthly report.

..."According to Doug Duncan, MBA's Chief Economist and Senior Vice President of Research and Business Development, the data is being driven by circumstances in seven states. "The percentage of loans in foreclosure would be well below the average of the last ten years were it not for Ohio, Michigan, and Indiana, and the rate of foreclosures started nationwide would have fallen were it not for the big jumps in California, Florida, Nevada, and Arizona."

Foreclosure starts set a record but most of the increase was due to events in California, Florida, Nevada, and Arizona. "Without these four states, foreclosure starts would have declined," Duncan said. In fact, 24 states did see a decline in starts. Duncan blamed a portion of the foreclosure starts in the four states on speculators who are walking away from properties in the face of declining prices and interest rate resets. The chaos in Florida's homeowner insurance market is also contributing to the problem. "

Mortgage News Daily

• 
  

Utility Companies Offer New Ways To Monitor Your Energy Use

The program is part of a growing trend in which U.S. utilities are experimenting with pay-as-you-go service that is supposed to encourage energy conservation -- but also has raised fears about abrupt service shut-offs.

Mr. Price, a retired computer programmer, drops by the office of his local utility, the Sacramento Municipal Utility District, every six to eight weeks and pays enough to cover a month or two of service. The credit is loaded on a smart card that he uses to download information into his home electric meter. The couple keeps track of the credit balance with the help of a small electronic display, located in the kitchen, which talks to the meter.

On a recent June morning, Mr. Price pushed buttons to see what the display box could tell him about his energy use. It said his 1,650-square-foot stucco home was using nine cents of electricity an hour. The home, built in 1969, had used $1.02 of power so far that day, $2.61 a day earlier and $62.52 the prior month. Most importantly, it said he had enough credit remaining for about 28 days of use. "It tells you things you couldn't have known before," Mr. Price says of the box.

A half-dozen utilities are trying prepaid programs now, but that could accelerate quickly if Texas utility regulators approve rules this summer allowing it.

Experimentation with prepaid-service meters is part of a broader trend that is changing the electric meter from a dumb recorder of kilowatt hours consumed into a conservation tool capable of helping people monitor their use and which will allow utilities to talk directly to customers.

Wall Street Journal

Mortgage Rates Continue Upward Spiral

"Meanwhile, Freddie Mac released a new purchase-transaction only version of its Conventional Mortgage Home Price Index this week which showed a sharp deceleration in house-price appreciation in the first quarter of 2007. As house prices grow less quickly and household incomes rise, the housing market will likely recover from its current slump, but perhaps not before the end of this year."

Rate increases for fixed-rate products were even more pronounced in the results of the Weekly Mortgage Applications Survey for the week ending June 8 released by the Mortgage Banker's Association.

The average contract interest rate for 30-year FRMs was up 26 basis points to 6.61 percent from a week earlier while points, including the origination fee, were down from 1.5 to 1.44. The 15-year FRM increased to 6.28 from 6.13 percent with points increasing to 1.39 from 1.2.

Mortgage News Daily

• 
  

How low can housing go? Buyers hope a lot

Modest annual declines have been seen in cities such as San Diego, Boston, Las Vegas, Phoenix and Honolulu, according to first-quarter data on existing single-family homes compiled by the National Association of Realtors. Meanwhile, price gains of just 1.4 percent or less were reported in New York, Chicago and Washington, D.C.

Those numbers have left many people trying to “time” the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last. In addition, the market forces that helped drive the housing boom — affordable financing and the alluring prospect of escalating home values — are no longer a given. Potential price breaks could be wiped out if interest rates rise any higher.

“In general, it is very difficult to time the market,” said Raphael Bostic, associate director of the University of Southern California’s Lusk Center for Real Estate. “The real problem with that is you don’t know when the floor is until after it’s passed. If the floor is right now, you missed it,” he said.

MSNBC

• 
  

Cities See Home Prices Spike; More Foreclosures in Phoenix
By Lauren Baier Kim

Investors helped to drive up property values in Phoenix during the housing boom, and have been a big factor behind the drop in home prices, says an article by The Arizona Republic. Phoenix is expected to see more than 18,000 notices of trustee sales this year -- a step before foreclosure -- the most filed since the 1980s real-estate crash, the newspaper sales. Of all homes that fall into foreclosure in the city, at least 25% are owned by investors, the Republic says. The newspaper goes on to note that the rising foreclosure rate is having a deleterious effect on local neighborhoods, with an increasing number of home vacancies and rentals driving property values down.

Tough days for real-estate agents

Selling homes seemed glamorous during the housing boom, but not so much now that the housing market has slowed, says USA Today. Many agents -- 25% of whom earned their real-estate licenses within the past two years -- are finding they have to work harder for paychecks that aren't so large, the newspaper says. In 2006, Realtors with two years' experience earned a median salary of $15,300 before taxes -- after subtracting taxes, marketing costs and association fees, the median take-home pay was $9,400, the paper says. Many new agents take home just half of their commission, typically sharing 50% with a buyer's broker and paying out-of-pocket for marketing costs, the USA Today says. An agent who earns a 6% commission on the sale of a $220,500 home ($13,230) may only take home $3,308 after splitting the commission with a buyer's broker, the paper says.

Rising values in Denver

Denver home prices are expected to appreciate by as much as 10% next year, according to an article by the Rocky Mountain News. That's in contrast to U.S. home prices, which may drop 1.3% this year, with home sales falling 4.6% on average, the News says. "The Rocky Mountain region is one part of the country that I'm most optimistic about," the newspaper quotes Lawrence Yun, chief economist of the National Association of Realtors, as saying. With a relatively high inventory -- there were 29,110 unsold homes in the Denver area in May, a 4.6% decline from May 2006 -- the metro area isn't a boom market, but is expected to outperform the U.S. market as a whole in 2007 and 2008, the News says.

Sales Spike in Seattle

Somebody better tell Seattle there's a housing slowdown going on -- in May, home sales in Seattle rose 21% from May 2006, the largest yearly increase in more than two years, according to the Seattle Post-Intelligencer. There are signs that the market is slowing, however, as the city's inventory of homes for sale increased 60% from May 2006, as condos in newly completed buildings like the Cosmopolitan and 2200 hit the market, the Post-Intelligencer says.

The median price dropped slightly last month -- down 1.2% from April to $425,000, but was up 2.4% from May 2006, the newspaper says. Yet while inventory went up in May to a 2.5-month supply, it still beats the national average of 5.4 months, the Post-Intelligencer says.

Wall Street Journal

________________

Cheap Money Era May Be Ending

Biggest mortgage spike in 4 years

Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects mortgage rates to top out near 7 percent by the end of the year.

Rising rates, among other factors, have caused the MBA and the National Association of Realtors to push back their forecasts for a home price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.

CNN

• 
  

An era of cheap money - gone

For years, the world has enjoyed historically low interest rates. This has helped fuel a boom in corporate mergers and private equity buyouts and a rally in stock prices and in other assets, such as real estate. But with economic growth outside the United States picking up and fanning inflation, central bankers around the world are pushing rates higher in a bid to cool growth and avoid bigger problems later on.

"There's been too much global liquidity and now we are seeing a shift away from multi-decades of declining rates and declining inflation," said Josh Stiles, managing director of research firm IDEAglobal in New York.

"This is the end of the cheap money cycle," Marc Pado, U.S. market strategist at Cantor Fitzgerald in New York, said.

CNN

• 
  

Adjustable-rate mortgages going sour

he mortgage bankers came out with their latest survey on mortgage delinquencies and foreclosures on Thursday, showing a small rise in the percentage of homeowners who are in the process of losing their homes because they aren't paying the mortgage. At the end of the quarter, 1.28% of all loans were in the foreclosure process, up from 1.19% in the fourth quarter. See full story.
For those who have fixed-rate loans, or who passed the strict criteria to get a loan from the FHA or VA, foreclosure and delinquency rates actually fell. But those who took out adjustable-rate loans fell further behind.
Foreclosure rates for adjustable-rate mortgages, or ARMs, have doubled over the past two years. This is not just the subprime borrowers, those with less than stellar credit. Even prime borrowers who opted for ARMs are in trouble.

MarketWatch

The Restraints on Real Estate Competition

Many obstacles remain to achieving more "robust competition" in the real estate market, the Federal Trade Commission and the Justice Department have concluded.

"Competition provides American consumers lower prices, better quality services, and greater choice. In the residential real estate industry, competition is vitally important because buying or selling a home is one of the most important financial transactions a consumer will ever undertake," the agencies wrote in a report issued last month.

Washington Pos

Full Commissions Make a Comeback

The tough market for home sales may be spurring a surprise side effect on real estate commissions: For the first time in years, the average commission rate on closed sales nationwide rose slightly last year.

According to a review of revenue and cost data from hundreds of brokerages by the industry publication Real Trends, the average commission rose by nearly one-fifth of a percentage point last year, to just under 5.2 percent. That turnaround came despite the growing number of real estate firms that offer discounted standard commissions or limited-service options in which consumers pay lower fees but perform some of the tasks traditionally handled by full-service real estate agents.

Washington Post

A Slap On The Hand For Upstart Redfin

The Northwest Multiple Listing Service has fined Redfin $50,000 and asked the company to stop publishing a popular blog in which the online real estate brokerage posted reviews of Seattle and San Francisco-area homes.

Redfin is appealing the fine, although it has shut down the reviews on its Sweet Digs blog.

The blog, which has about 3,000 e-mail and online subscribers, is written by 15 freelance writers who over the past five months posted reviews on about 1,000 homes in Seattle and San Francisco. The company says it plans to maintain the blog as a source of information on pricing trends and recently sold homes.

Redfin chief executive Glenn Kelman said he had no choice but to comply, noting that the listing service had threatened to shut off its daily feed of for-sale listings.

SF Chronicle