Archive for March, 2013

Last year I pointed out that loan modifications are not an entitlement, banks don’t want to make them one. That's not how borrowers see it. One of the moral hazard consequences of the housing bubble is a belief among borrowers that if they get in trouble, they will be given an opportunity to reduce their mortgage payments and stay in their homes because that's what happened over the last six years. However, the only reason borrowers were given special dispensation is because the banks were desperate and had no other viable alternatives. From Must-sell shadow inventory has morphed into can’t-sell cloud inventory: The necessity of loan modifications Ostensibly, loanowners and lenders agreed to the price of money (interest rate and…[READ MORE]

With house prices bottoming, lenders are less risk adverse because they know rising prices reduces losses when loans go bad. As a result, lending standards will soon begin to loosen up on the fringes as lenders will take on marginal borrowers in an attempt to underwrite more loans. This is a natural part of the credit cycle, and fortunately with new regulations in place governing qualified mortgages, the cycle of loosening standards should not go so far as to inflate another disatrous housing bubble. But that doesn't stop lenders from trying. Many in the lending industry think their work is like science that continually advances. It is not. It is far more akin to assembly line work where the same…[READ MORE]

Shevy Akason recently was a guest on Nelson Radio's show. Enjoy. Contact Akason Realty Consulting [email protected] 949.769.1599 Name * Email * Phone * Thank you for your interest in Akason Realty Consulting Akason Realty Consulting performs the following services: (1) provide real estate instruction and evaluation; (2) supply unique property valuation reports to our clients; and (3) facilitate real estate sales without pressure, manipulation, or emotional appeals. If you want to fully understand what makes us different, read Urgency Versus Reality: realtors Win, Buyers Lose. Shevy Akason Evergreen Realty - The ARC Group [email protected] Lic. 01836707 Credentials: Bachelor of Arts - Claremont Mckenna College 2003 Real Estate investor since 2004 Academic All American - NDSCS 2001 Associates Degree - NDSCS-…[READ MORE]

The increase of home values have pushed some 1.4 million underwater borrowers into positive equity territory.  The Federal Reserve have engineered ultra low mortgage rates and banks have suppressed the shadow inventory into "cloud inventory'"   Meaning many homeowners will receive loan modification after loan modification leading to a false sense of confidence,  but in the long term most will end up losing their homes. However, for these newly above water borrowers threats still remain to push them underwater again.  Whether its market risk,  balloon payment shock, mortgage rate increases,  tax law changes or even demographic changes in their neighborhood it's probably on their mind that they could be upside down again.  Therefore, some of these borrowers are contemplating selling…[READ MORE]

The big national banks entered into a settlement agreement with attorneys general across the country early last year. Under the terms of the settlement, banks were allowed to count losses from short sales toward meeting their payment goals, but foreclosure losses did not count. Therefore, the banks radically changed their policies and started approving short sales and stopped pursuing foreclosures. As a result, short sale activity increased, which cleared many languishing deals from the MLS, and the banks stopped processing REO which further reduced the MLS inventory. Whether by design or by accident, the dramatic decrease in MLS inventory caused the housing market to bottom early last year. This created one big problem for the banks: squatters. People who complete…[READ MORE]

Government subsidies are like drugs. Once the market is exposed, the participants quickly become dependent, and like any addict that goes through detox, getting off the subsidies can be very painful. The housing market completely relies on government supports and subsidies with over 95% of the loans underwritten in the United States backed by either the FHA or the GSEs with explicit government backing for any losses. Politicians claim they want to reduce the government's footprint in housing finance, but the various interest groups who make a living from residential real estate transactions (realtors, mortgage brokers, homebuilders) are united in their opposition to any reduction in the level of government support for housing. Much has been made of the recent…[READ MORE]

With inventory being in such short supply, anything put on the market is likely to sell easily. Two years ago when there were far more properties for sale than buyers who wanted them, professional marketing and broad exposure was necessary to attract a buyer's attention. Not so today. This fact is prompting many to try to eliminate at least half the real estate commission and list the properties themselves. Going for-sale-by-owner or FSBO is not without its drawbacks. First, the presentation of FSBO properties on Craigslist or the MLS is often dismal. Go to Redfin and see for yourself. Second, if the seller is unwilling to pay a buy-side commission, buyer's agents often won't show the property, or they will…[READ MORE]

According to Zillow about 30% of mortgage borrowers are underwater. If you factor in sales commissions and transaction costs, the number is closer to 50%. When you reflect on it, what does an underwater borrower really own? They don't have any equity, and since their underwater, even if prices go up, they still won't have any equity. Perhaps they have the hope of equity, but the only tangible thing they own is their loan -- that's why I often refer to them as loanowners. It's probably more accurate to call them money-renters because without an equity stake, they are merely renting money from the bank for the privilege of living in the bank's house. There isn't much difference between a…[READ MORE]

When housing bears made their case back at the peak of the housing bubble, they made assumptions about the application of the rules -- rules that were subsequently changed. By the old rules, which served us for hundreds of years, when borrowers defaulted on their loans, banks were supposed to mark the value of the loans on their books to fair market value and record any losses. Under the old regime, banks would have recognized loan losses, foreclosed on the homes, and subsequently sold the properties to recover their capital and put that capital back to work. When the government suspended mark-to-market accounting in April of 2009, the mechanism that would have put millions of REOs on the market was…[READ MORE]

There are so many subsidies, handouts, and tax deductions that have a powerful affect in the housing economy and it's quite surprising when you list them all.  I wanted to create this list as the media is cheering the "Return of the Housing Market".  However, look at the factors, for example like low mortgages rates it's a type of handout.  The average American should be concern with these policies because it affects them everyday life they just don't know or understand how.  The bottom line is why should citizen A's tax money be used to purchase citizen B's house.   This is not some public assistant program, so if citizen B wants a house they should use their money to purchase…[READ MORE]

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