Archive for August, 2014

Changing the timing of loss recognition for lenders could enable them to process their latent foreclosures, recover their capital, and regain true solvency again. Why have lenders permitted millions of delinquent borrowers to squat for years? Why haven't they processed foreclosures in a timely manner and recycled much-needed supply back into the housing market? The short answer is because processing foreclosures forces them to recognize losses they can't afford to take, but what if that wasn't their only alternative? In April of 2009, lenders convinced government regulators to allow them to value loans on their balance sheets based on financial models rather than current market value for those securities, thus beginning the era of "mark-to-fantasy" accounting. By allowing lenders to…[READ MORE]

Adams WWII veteran receives medals that were lost Posted: Aug 14, 2014 5:03 PM PDT, By Alyssa Meyer, Multimedia Journalist ADAMS COUNTY (WAOW) - An Adams County World War II veteran is about to be reunited with some of his prized possessions. Roger Roberts of Adams remembers D-Day like it was yesterday. "We got up in the morning and there were two big destroyers on each side because they spotted a submarine," said Roberts. Even at 97 years young. "We laid on the ground and didn't stand up until the next morning, and then we went from there until Omaha Beach, and then we went in about three miles inland and we set up camp," said Roberts. He was a…[READ MORE]

Proposition 13 was passed ostensibly to prevent rising property taxes from forcing people out of their homes. Proposition 8 may do that anyway. When Proposition 13 was passed, one of the main selling points was to prevent property taxes from rising so people on fixed incomes wouldn't be forced to sell because they couldn't afford their property tax bills. However, Proposition 13 was modified by Proposition 8 to allow property taxes to rise after a price crash so state and local governments wouldn't be locked in to low tax revenues from reassessments during the crash. Whether by accident or by design, Proposition 8 negates one of the primary selling points of proposition 13, and as lenders work to reflate the…[READ MORE]

Higher prices and weak wage growth, particularly among lower income Americans, prices out many marginal buyers. Each prospective buyer investigates current financing terms as part of their process. Lenders apply current underwriting standards and determine the loan balance they will approve and down payment required before they will fund. Since loan plus down payment equals maximum bid amount, prospective buyers house-shop with the budget established for them by their lender. As is human nature, most people spend their full budget. Every buyer goes through this basic process, and since financed purchases dominate the resale market, price levels of individual properties become tethered to the incomes of individuals who desire that property. If high wage earners suddenly became enamored with living…[READ MORE]

With the belief in continued home-price appreciation waning, consumer motivation to buy homes is declining. During the housing bubble mania, everyone wanted to own a house, mostly to capture the gains of rapid home price appreciation. Nobody believed the value of houses could go down, so there was no perception of risk to temper the unbridled enthusiasm to buy homes. Now that house prices have crashed, potential buyers know disaster looms if they buy at the wrong time. This increased caution has many buyers concerned about valuation and the obvious manipulations of the market with artificially low mortgage rates and artificially low for-sale housing inventory. This added concern dampens buyer enthusiasm. Fannie Mae: Americans increasingly skeptical on housing Housing survey…[READ MORE]

The merger of Zillow and Trulia may force marginal agents out of the business and concentrate activity among the best producers. American realtors have long maintained a system of high commissions that bloats the number of working real estate agents. Many poorly trained and poor performing agents stay in the business despite completing few transactions because they can make a great deal of money on the few transactions they do complete. Real estate recessions purges many of these bad agents, but like April showers bring May flowers, increased sales volumes sprouts tens of thousands of new agents who cling to the margins. Other countries don't have our high commission system, and they have fewer real estate agents. In Great Britain…[READ MORE]

As mortgage interest rates go up, affordability declines. Only rising wages can offset the effect of rising mortgage rates. Will it be enough? When mortgage interest rates finally begin to rise up to historic norms, a move anticipated by nearly everyone, home affordability will suffer because borrowers will need to spend more money to pay their mortgages. Since most borrowers maximize their loan amounts, the only way to overcome the problem of rising mortgage rates is for borrowers to make more money. With high unemployment and low labor participation rates, employers don't need to increase pay to fill new jobs, and employees lack the leverage to force employers to pay more. But what if rising interest rates across the lending…[READ MORE]

The housing market is changing, but many sellers refuse to acknowledge the cooling market may force them to lower their asking prices. It's no longer a seller's market; wishful thinking and hope of a fall turnaround won't change that basic fact. Sellers are stubborn: even during the crash, many were unwilling to lower their prices to make a sale; after all, real estate only goes up, right? Real Estate's Epic Rebound Starts to Cool A Potential Rate Rise Also Poses Uncertainty By Gregory Zuckerman, Aug. 2, 2014 10:59 p.m. ET The U.S. real-estate market has stormed back over the past five years after enduring its most brutal period since the Great Depression. The rebound has rewarded investors and boosted the…[READ MORE]

Lenders slowly process loan modifications, mostly to avoid approving them. While they wait, most loanowners enjoy a free ride. Should we be concerned about the speed at which lenders process loan modification applications? After all, most borrowers who apply for a loan modification stop making payments during the process. They apply because they can't afford the payment in the houses they occupy, so they quit paying while lenders consider their applications. From a borrower's perspective, waiting may create uncertainty, but they gain the benefit of free housing for as long as it takes. Mortgage Relief Faces Mounting Backlog as Homeowners Await Aid Reporter: Christine Layton July 30, 2014 Financially struggling homeowners are facing long delays after turning to the foreclosure…[READ MORE]

A global economic slowdown could trigger a US recession and potentially cause another housing bust. The US economy struggles for growth five years after the Great Recession officially ended. Economists point to encouraging signs of future growth -- just as they erroneously have over the last five years. The green shoots meme is so old and overused that economists tire of using it, reporters tire of reporting it, and ordinary citizens tire of hearing it. Realistically, the US economy is still fragile, and a global economic slowdown could easily trigger a recession in the US, but would that recession cause another housing bust? Economist who predicted busted housing bubble says another recession is coming By Bernard Condon, Associated Press, Posted:…[READ MORE]

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