Population Growth Number

ASU report: Foreclosures still impacting sales

Thursday, February 11, 2010

Phoenix Business Journal - by Mike Sunnucks

Close to half of the existing home sales in the Phoenix metro area last month were foreclosed properties exhibiting continued struggles in the housing market, according to an Arizona University report released Thursday.

The report also said that two out of three home sales in the Valley in January were either foreclosures or re-sales of foreclosed homes.

“Even in response to hiatus and mortgage modification programs, foreclosure activity did not slow,” said Arizona State University economist Jay Butler. “It takes some time to finish recording transactions, though, so some slowing might still be evident in the next few months.”

ASU’s W.P. Carey School of Business reported Thursday there were 3,500 single-family foreclosures in January with a total of 7,725 total home sales. There were 495 condo foreclosures during January with 1,150 total condo sales last month.

There were 1,085 foreclosures of single-family homes in Phoenix last month; 140 in Scottsdale and 335 in Mesa.

Median single-family home prices in the Phoenix area dropped from $140,000 in December to $136,500 in January. The median price was $136,000 in January 2008.

 

Principal Cuts May Prevent Foreclosures

At least 7 million borrowers will lose their homes this year and next unless there is a broad increase in property values or lenders become much more willing to cut the principal on mortgage loans, an analyst with Amherst Securities Group told the U.S. House Financial Services Committee last month.

That testimony has motivated Federal Deposit Insurance Corp. Chair Sheila Blair to consider incentives for lenders to cut principal on $45 billion in mortgages her agency has acquired from seized banks.

“We’re looking now at whether we should provide some further loss-sharing for principal write downs,” says Bair. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs.”

While principal reductions are rare, some banks are doing them. In the third quarter of 2009, about 21,000 home loans were modified by reducing the principal, according to Mortgage Metrics, a government publication.

Mark Zandi, the chief economist for Moody’s Economy.com, suggests that banks receive a federal match of $1 for every $2 in principal reductions they offer to home owners.

“You’re not going to wipe out all the borrowers’ negative equity,” he says. “This just gives them enough hope to get them committed again.”

Source: Bloomberg, John Gittelsohn and Prashant Gopal (01/07/2010)

Loan Modifications Hit Credit Scores

Applying for a mortgage modification and being in a months-long trial period can devastate a home owner’s credit score.

Under the government plan, troubled borrowers can have their mortgage payments reduced to 31 percent of their pre-tax income. They are first put in a trial modification for several months to test whether they can meet the requirements of the new mortgage.

Borrowers who were previously current on their mortgages will see their FICO scores fall about 100 points while they are in the trial period, according to the Treasury Department. Borrowers who were previously late or missed payments will see their scores fall more, the government says.

The longer a borrower is in the trial period, the greater the impact on their credit scores, Once the modification is approved, the borrowers’ mortgage credit status will be listed as current and that should improve their scores, the Mortgage Bankers Association explains.

Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive, borrowers report.

Source: CNNMoney.com, Tami Luhby (12/28/2009)

Animated Unemplyment Map

I thought this map was amazing to see.  Click the link to see.

 

http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

 

3 signs of the next real estate collapse

The latest bubble is about to burst, but this time it's in the commercial market. Here's how to see it coming.

By Katie Benner, writer-reporter

October 22, 2009: 10:16 AM ET

 

NEW YORK (Fortune) -- When the FDIC closed Chicago's Corus Bank last month, it may have signaled the beginning of the next shock to the banking system: commercial real estate defaults.

Corus, whose balance sheet was larded with bad construction loans, is just one of many banks that have a slew of this debt on their books. Refinancing the $2 trillion in commercial mortgages will be tough, as property values decline. And in this new age of cautious lending, few banks are willing to refinance loans.

"There is a lack of new debt," says Michael Haas, a real estate attorney at Jones Day. "There is a hesitancy to extend credit when there is a real possibility that the real estate may be worth less than it was a few years ago."

Now, in a situation eerily similar to the subprime crisis, the result is likely to be a wave of foreclosures and loan defaults that could, in turn, trigger a collapse in the market of the structured bonds backed by commercial real estate and construction debt. But when, and how bad will it be? Here are three indicators to watch.

1. Special Servicers

Firms such as LNR Property, CW Capital, and Centerline are tasked with unraveling the most troubled loans in a last ditch attempt to keep them from default. An uptick in business at these companies means more borrowers under duress.

Between April and August of this year, the value of commercial loans in special servicing doubled to about $50 billion, according to Trepp, a firm that tracks the commercial real estate market.

2. Big Projects

When rents and property values fall, apartment complexes, malls, hotels, and major projects financed during the bubble become more likely to default on their debt.

Fitch Ratings has identified several stressed loans that have been sliced and diced into billions of dollars in commercial mortgage-backed securities, including Tishman Speyer's $3 billion loan for its Stuyvesant Town-Peter Cooper apartment complex in Manhattan and a $4.1 billion loan secured by Extended Stay's hotels.

3. Regional Banks

Watch to see how banks such as Fidelity Southern and United Community Banks -- identified in a SunTrust Robinson Humphrey report as having a high proportion of noncurrent construction loans -- hold up over the next few months. Community banks were especially aggressive in originating commercial real estate loans, but they could still manage to avoid big problems.

"Medium and small banks have a lot of exposure to local building projects," says Chris Whalen, a bank analyst and co-founder of Institutional Risk Analytics. "They're forbearing or getting involved in their customers' business rather than taking losses. They're hoping they can hold out until values come back." 

 

Housing sale prices keep rising

by J. Craig Anderson - Oct. 21, 2009 12:00 AM
The Arizona Republic

The Valley housing market has settled into a pattern of mild price recovery, with the median sale price rising by a few thousand dollars in recent months, according to the latest Arizona State University report on same-home sales.

But the report's author warned area residents not to interpret his findings as proof that home prices have stabilized.

Professor Karl Guntermann, who published the most recent ASU Repeat Sales Index report on Tuesday, said there are signs that home foreclosures in 2010 could jolt the housing market out of its current state of relative calm.

"The worst appears to be past, but the large number of foreclosures likely to hit the market through 2010 makes it difficult to predict the direction of house prices with any certainty," said Guntermann, of ASU's W.P. Carey School of Business.

The ASU index continued to show a steady decrease in the gap between home-sale prices in 2009 and prices a year earlier.

In July, the most recent month covered by the index, home prices were down about 28 percent compared with July 2008, and the median sale price was $125,000.

The index showed steady improvement from June, when the year-over-year decline was 31 percent, and the median sale price was $122,000.

The same-home sales index, which compares prices of homes that have been sold multiple times since 1989, shows an uninterrupted run of year-over-year price decline that has lasted a record 29 months.

However, Guntermann said 2010 is likely to see that losing streak reach its end. With the year-over-year gap closing by 2 to 3 percentage points each month, it's likely the index will cross over into positive territory by the end of next year, he said.

 

Commercial Real Estate Debt Jumps Amid Soaring Delinquencies

By Sarah Mulholland

Oct. 19 (Bloomberg) -- Yields on bonds backed by hotel, shopping-center and skyscraper loans narrowed relative to benchmarks as U.S. programs help drive demand even as late payments soar on the underlying commercial real estate debt, according to Barclays Capital.

The gap, or spread, on top-ranked commercial-mortgage backed securities tightened 0.15 percentage point relative to benchmark swap rates to 6.25 percentage points for the week ended Oct. 15, Barclays data show. That compares with 10.15 percentage points in March, according to Barclays.

Demand for the bonds swelled as rising stocks buoyed investor sentiment and government programs helped further prop up prices of the debt. Rising delinquencies on commercial mortgages provide a “counterpoint to the rally,” Barclays analysts led by Aaron Bryson in New York wrote in an Oct. 16 report.

“The rally in cash CMBS continued,” Bryson wrote. “Better-than-expected earnings reports and strong economic data led to broad-based credit tightening and a further reduction of risk premia.”

Top-rated commercial mortgage-backed debt is trading at a price of about 84.70 cents on the dollar, up from 55.91 cents in mid-March, according to Merrill Lynch & Co. indexes.

Still, “the CMBS delinquency rate is on pace for a large jump,” Bryson wrote.

Commercial mortgages bundled and sold as bonds that are at least 30 days behind on payments rose 30 basis points to 5.42 percent for October, according to Barclays. About 36 percent of the loans hadn’t yet been reported for this month as of the report date. A basis point is 0.01 percentage point.

TALF Fading

The fourth round of the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF, is scheduled for Oct. 21. The Fed began lending against so-called legacy commercial mortgage- backed securities, or those sold before Jan. 1, in July as part of its effort to stimulate lending.

The Fed added newly issued commercial-mortgage backed bonds to TALF in June. No new bonds have been sold through the program.

The impact of TALF has “started to fade” as investors anticipate the start of buying under the U.S. Public Private Investment Partnership, a separate government program that also seeks to attract investors by boosting returns with taxpayer loans, according to Bank of America Corp. analysts.

“Legacy CMBS TALF is still in effect but demand does not seem strong enough, by itself to drive this sector significantly tighter,” the Bank of America analysts led by Roger Lehman in New York said in an Oct. 16 report.

Plunging Values

Unlike the TALF, the PPIP isn’t limited to securities carrying top-ratings and will finance the purchase of a broader swath of securities, including bonds that have had ratings cuts.

Spreads on some lower-ranked bonds have tightened on “at least the perception of PPIP buying,” according to the Bank of America analysts.

TALF loan requests to purchase legacy bonds will likely increase to around $2 billion for October, compared with $1.4 billion last month, according to Barclays. While the fourth round may be stronger than last month’s “disappointing” results, it will fall short of August’s $2.3 billion high, the Bank of America analysts wrote.

The government has made reviving the $700 billion commercial-mortgage bond market a priority as plunging property values and a pullback in lending threaten to derail an economic recovery. U.S. commercial real estate prices are down 40.6 percent from the October 2007 peaks, according to Moody’s Investors Service.

 

Recession-Proof Places for Working Retirees

Retirees who must return to work because their nest eggs have taken a major hit should consider places where it’s easiest to get a good job.

Forbes magazine analyzed cities to identify those where there is a strong job outlook—as well as plenty of sunny days. It also considered how pricey the housing market is and how high health costs are.

Here are its 10-best recession-proof cities to live in retirement:

1. Atlanta
2. Dallas
3. Tampa, Fla.
4. Houston
5. St. Louis
6. Austin, Texas
7. Las Vegas
8. Phoenix
9. Kansas City, Mo.
10. San Antonio

Source: Forbes, Zack O’Malley Greenburg (10/15/2009)

Foreclosures: Down But Still Elevated

Mortgage foreclosure filings declined in September for the second-straight month, but September was still the third-highest monthly total behind July and August since real estate data firm RealtyTrac began keeping count in January 2005.

September filings were down 4 percent from August, according to a report released Thursday, but they were up 29 percent compared to August 2008. Third-quarter filings were 5 percent higher than the second quarter.

One in every 136 U.S. housing units received a foreclosure filing during the third quarter. "Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters," James J. Saccacio, CEO of RealtyTrac, said in a statement.

Nevada’s foreclosure rate led the nation, followed by Arizona, California, Florida, Idaho, Utah, Georgia, Michigan, Colorado, and Illinois.

Unemployed homeowners are driving the increase.

Source: Reuters News, Julie Haviv (10/15/2009)

Economists Predict Housing Recovery

Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.

Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.

More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.

Source: Associated Press, Mae Anderson (10/12/2009)

BoA Struggles With Loan Modifications

Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.

But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program.

"We're sure working hard," said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company's low success rate. "We don't want to be down there."

There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.

Source: Washington Post, Renae Merle (10/12/2009)

'Foreclosure aid' firms to pay fines

Oct. 14, 2009 12:00 AM

The Arizona Attorney General's Office has reached settlements with two Valley "foreclosure help" firms it filed complaints against this year as part of the national "Operation Loan Lies" crackdown on mortgage fraud.

Richard Winer, principal of the firm Taken Care of Investments, has agreed to pay fines totaling $691,000, half of which goes to consumers who lost money to the firm, according to a Maricopa Superior Court consent judgment.

In March, the Attorney General's Office filed a complaint alleging Winer and his businesses defrauded 270 Arizona homeowners in danger of foreclosure by promising to obtain the deed to their home and then lease it back to them. Instead, homes were sold to investors who usually evicted homeowners. Winer is consenting to pay the fine without admitting guilt.

Glendale-based Hope for Homeowners Now and its principals, Matthew Castaneda and Michael Winding, have been ordered to pay almost $580,000 in fines, according to a default judgment filed in Superior Court. In July, the Attorney General's Office filed a complaint against Hope for Homeowners Now alleging the company solicited an upfront fee of $3,195 from homeowners by discouraging them to work with non-profits that provide loan-modification help for free.

Home Buyer's Fair on Saturday

The Arizona Mortgage Lenders Association is teaming with some government housing agencies to hold the Home Buyer's Fair 2009 on Saturday. The free event offers help with the $8,000 tax credit for first-time buyers, buying a home with no money down, credit repair, qualifying for a mortgage and buying a foreclosure home.

The Mortgage Lenders Association is working with the Phoenix office of the Department of Housing and Urban Development, Consumer Credit Counseling and housing agencies to put on the event, which starts at 10 a.m. at the Glendale Renaissance Hotel. Details: azmortgagelenders.com.

Executives shuffle at brokerages

Some shuffling at the Valley's residential brokerages. Dominic Scappaticci has left Russ Lyon Sotheby's Phoenix office to be president of Phoenix-based Realty Executives. John Foltz, Realty's former president, will become president emeritus. Russ Lyon Sotheby has named Glenn Niere chief executive and Deems Dickinson president. Phoenix-based Russ Lyon merged with Equitable Real Estate last year.

 

Commercial real estate to drive U.S. bank failures

Mon Oct 12, 2009 5:32pm EDT

 

By Elinor Comlay - Analysis

NEW YORK (Reuters) - The next big headache for banks is likely to be commercial real estate and analysts expect big losses and another wave of bank failures to result.

Banks held about $1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 percent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks are better diversified.

The banks that analysts say could risk big losses include Salt Lake City's Zions Bancorp (ZION.O), Columbus, Georgia- based Synovus Financial Corp (SNV.N) and Dallas-based Comerica Inc (CMA.N).

But it is not just earnings that are at stake -- bank failures could surge in the coming quarters.

"The serenity of the quiet closure of two to three banks per week is soon going to come to an end," said George Ball, chairman of Sanders Morris Harris Group, an investment bank and investment adviser, in Houston.

Banking regulator the Federal Deposit Insurance Corporation had 416 banks on its watch list of problem banks at the end of the second quarter and veteran analyst Dick Bove at Rochdale Securities expects another few hundred will fail in the next few quarters.

The FDIC closed Chicago-based Corus Bank on September 11, following losses on commercial real estate and condominium developments in Arizona, California, Florida and Nevada.

At Warren Bank in Michigan -- closed on October 2 by the FDIC -- almost 40 percent of its $395 million in total loans were in commercial real estate.

"Real estate lending has long been the specialty of Warren Bank," the company still claims on its website.

Analysts are worried banks such as Corus and Warren Bank may be just the first of a coming wave of bank failures due to commercial mortgages.

Banks have been slow to recognize losses from commercial mortgages to forestall posting big losses, preferring to alter loan terms in the hope an improving economy will keep the loans from heading south, a phenomenon widely known as "extend and pretend."

"It takes a long time for an actively rented commercial real estate space to get to a point where a bank can't be flexible in terms of conditions and has to start writing it down," said Tom Mitchell, analyst at Miller Tabak & Co.

Banks may set aside larger amounts of money to cover losses in the fourth quarter, when banks consult with auditors over their results, Mitchell said.

When commercial real estate makes up a large portion of a bank's balance sheet, the bank is at risk of being forced to set aside much more money for losses.

At Zions, commercial real estate accounted for almost 35 percent of its $41.6 billion in loans at the end of the second quarter, while Synovus had almost 28 percent of its $28 billion loan portfolio in commercial real estate. Comerica's commercial real estate loans made up about 22 percent of its loan portfolio.

But while regulators stepped in to prop up large banks suffering from residential mortgage losses, they are not expected to help out small regional banks suffering commercial real estate losses since these are not seen as a threat to the wider financial system.

"The system will survive but with more cuts and bruises. We're going to see quite a lot of consolidation," said Marshall Front, chairman of Front Barnett Associates in Chicago.

"It's not pretty and there's not a lot of relief out there for these banks."

(Reporting by Elinor Comlay; editing by Andre Grenon)

 

 

 

Experts: Plummeting prices have rendered condos nearly worthless

Experts say changes to FHA-backed loans could force some unfinished buildings into foreclosure

 

 

by J. Craig Anderson - Oct. 9, 2009 03:02 PM

The Arizona Republic

 

 

New federal loan-guarantee rules imposed to fend off future government losses from plummeting condominium prices have rendered condos utterly worthless, Valley real-estate experts said.

 

The Federal Housing Administration rules, which took effect Oct. 1, prohibit any new FHA-backed loans on condo units in projects that include more than 25 percent commercial space.

 

In addition, no single investor - including the developer - may own more than 10 percent of the units in a particular project. That particular restriction alone creates a catch-22 from which condo builders most likely cannot escape, said mortgage originator Jill Hoogendyk of Wallick & Volk in Glendale.

Another rule that has sellers and brokers scratching their heads prohibits FHA loans in condo developments that aren't "primarily residential," which could be taken to mean the FHA won't guarantee loans in future mixed-use projects.

 

"I'm predicting that what we'll see is whole condominium complexes sitting empty," Hoogendyk said.

 

The new rules are a reaction to substantial losses on federally insured condominium mortgages in the past year, government officials have said. In Maricopa County, condominium foreclosures have outpaced condo-unit sales by nearly two to one since Jan. 1, according to real-estate analyst Zach Bowers of Ion Data in Mesa. According to Bowers, lenders foreclosed on about 8,200 condo units between Jan. 1 and Sept. 30, compared with about 4,900 units sold during the same period.

 

"It's been pretty much consistent throughout the year that no one's buying condos," Bowers said. "The whole market seems to have stagnated."

 

The new restrictions won't directly affect high-end, luxury condos that sell for more than the Federal Housing Administration's roughly $350,000 lending limit, but Hoogendyk said FHA loans are by far the most commonly used loan among condo buyers. Without that option, buyers would have to obtain conventional loans, which are more expensive and difficult to qualify for, or they would have to pay cash.

 

Hoogendyk said the FHA rules amount to a death sentence for the Phoenix-area condo market, which had only been kept on life support by the continued availability of FHA loans.

 

Creating a special restriction that only applies to one type of housing is discriminatory, local critics said, and it punishes existing condominium owners by making their properties nearly impossible to sell.

 

"They'll lose everything," Hoogendyk said, "And quite honestly, they'll move just because they're afraid to live there."

 

Bowers said there are Phoenix-area condominium projects in which only a handful of buyers purchased individual units. The only viable use for such projects would be renting the unsold units as apartments, which many condo building owners already have been doing.

 

However, most have continued trying to sell units, hoping to eventually sell out as the real-estate market recovers. Because of the new rules, local and national experts seem to agree that owner-occupants in half-empty condo buildings are now practically doomed to foreclosure. Hoogendyk said the last thing Arizona's real-estate market needs is government decisions that hinder its recovery.

 

"They should be making it more attractive to buy condos, not less," she said.