May312013
Banks squeeze market supply further to juice prices
Banks are enjoying the market’s recent strength as collateral value returns to back their bad loans. Homeowners who aren’t distressed don’t mind either, but it’s the banks that benefit the most from the current situation of restricted MLS supply. To further restrict supply and really get prices to shoot upward, banks stopped foreclosure processing on May 6, 2013. Ostensibly, they did this for procedural reasons related to new regulations, but this is simply a ruse to cover their real intent of forcing prices to shoot up even more rapidly to help them avoid more losses when they finally do liquidate their bad loans.
3 big banks nearly halt foreclosure sales after U.S. tweaks orders
By E. Scott Reckard — May 19, 2013, 12:04 p.m.
Sales of homes in foreclosure by Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. ground nearly to a halt after regulators revised their orders on treatment of troubled borrowers during the 60 days before they lose their homes.
The banks said they paused the sales on May 6 to make sure that their late-stage foreclosure procedures were in accordance with the guidelines. The banks wouldn’t say exactly which issues had been under scrutiny.
These rules were published far in advance of them taking effect. If they banks really did need to stop to comply, their serving departments are hopelessly incompetent.
Bank of America Corp., by contrast, continued foreclosure sales at a normal pace, apparently confident its procedures met the revised restrictions.
“We manage our mortgage servicing operations in compliance with all laws, regulations and standards for sound business practices,” BofA said Friday in a statement.
Particularly when that compliance benefits them by delaying or avoiding loss recognition.
The halted foreclosures are the latest complication stemming from a settlement between 13 large mortgage servicers and their federal overseers. Banks and regulators also have struggled to distribute billions of dollars in aid to borrowers equitably as required under the settlement.
Chase resumed a normal volume of foreclosure sales last week, saying its practices complied with the latest bulletin from the Treasury Department agency that regulates national banks, the Office of the Comptroller of the Currency, or OCC.
“In response to the OCC guidance and in an abundance of caution, we temporarily halted foreclosure sales where we could to validate that our process covered the guidance,” Chase said in a statement. “We have since resumed sales.”
“In an abundance of caution?” What a thoughtful bank… upstanding and righteous… someone good to do business with…
Wells and Citi were still on hold as of Friday, according to PropertyRadar.com, which tracks foreclosure filings in California, Nevada, Arizona, Oregon and Washington.
“We are in the process of complying and following the directive set forth in the OCC guidance,” Citigroup said.
Wells, saying the latest OCC bulletin had “slight changes from the previous,” declared that it “wanted to be absolutely sure that our interpretation of the language was the same as our regulators.”
“We simply needed to take the time to assure that we can validate and document our compliance,” the San Francisco bank said in a statement.
Perhaps lenders are worried about rising rates or hurting the rally in progress. I think BofA will be happy they took advantage of the lack of supply by their competitors and offloaded a few more properties.
The bulletin, which changed the timing of certain measures aimed at preventing wrongful foreclosures, listed 13 issues for the banks to address — “minimum guidelines” beginning with: “Is the loan’s default status accurate?”
The issues touched on a laundry list of the legal and procedural problem areas in which errors and short-cutting, including the “robo-signing” of court affidavits, were common during the wave of foreclosures that struck in 2009 and 2010.
American Banker, which first reported on the pause in foreclosure sales, called the hiatus “an echo of the 2010 foreclosure halt that kicked off several years of wrenching procedural scrutiny of the mortgage servicing industry.”
wrenching procedural scrutiny? The delays were largely welcomed by the banks who didn’t want to take losses. Plus, in places where their servicing rules and procedures were defective, they should improve them with or without a crisis to force it to happen.
At Wells, the biggest mortgage servicer, foreclosure sales in the five Western states fell to 17 for the week beginning Monday, May 6, from 298 the previous week, the PropertyRadar data showed.
A bank official predicted Wells would soon resume selling the houses of defaulted borrowers. “It won’t be long,” Wells mortgage spokewoman Vickee J. Adams said, although she declined to say exactly when.
When they believe they can sell into the price rally is when they will continue processing foreclosures and selling the REO. This is a great time to be selling real estate. The buyer frenzy is there to absorb many more properties, and with interest rates rising, the banks had better sell a few more now before affordability crumbles and potential buyers can borrow enough to finance peak prices.
Near-peak pricing on REO
The reason the banks are hoping to drive prices up is apparent on REO like today’s featured property. In a supply restricted market, they can sell this REO without losing a great deal of money. Of course, this drags out their liquidations for years, but that doesn’t seem to bother them. Expect these slow liquidations to go on for the foreseeable future.
[raw_html_snippet id=”newsletter”]
[idx-listing mlsnumber=”OC13095044″ showpricehistory=”true”]
16337 SHADBUSH St Fountain Valley, CA 92708
$859,000 …….. Asking Price
$901,000 ………. Purchase Price
6/12/2007 ………. Purchase Date
($42,000) ………. Gross Gain (Loss)
($68,720) ………… Commissions and Costs at 8%
============================================
($110,720) ………. Net Gain (Loss)
============================================
-4.7% ………. Gross Percent Change
-12.3% ………. Net Percent Change
-0.8% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$859,000 …….. Asking Price
$171,800 ………… 20% Down Conventional
3.77% …………. Mortgage Interest Rate
30 ……………… Number of Years
$687,200 …….. Mortgage
$159,242 ………. Income Requirement
$3,190 ………… Monthly Mortgage Payment
$744 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$179 ………… Homeowners Insurance at 0.25%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$4,114 ………. Monthly Cash Outlays
($739) ………. Tax Savings
($1,031) ………. Principal Amortization
$217 ………….. Opportunity Cost of Down Payment
$235 ………….. Maintenance and Replacement Reserves
============================================
$2,795 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$10,090 ………… Furnishing and Move-In Costs at 1% + $1,500
$10,090 ………… Closing Costs at 1% + $1,500
$6,872 ………… Interest Points at 1%
$171,800 ………… Down Payment
============================================
$198,852 ………. Total Cash Costs
$42,800 ………. Emergency Cash Reserves
============================================
$241,652 ………. Total Savings Needed
[raw_html_snippet id=”property”]
“In an abundance of caution”
What happened to that caution between between 2003 to 2007? Also, since government guarantee’s 90% of loans what are the banks risks? Since 2008 banks have risk free lending, it’s all on the taxpayer or the Fed. Any these banks are shareholders in the Fed which can print it’s way out of trouble it’s truly no risk.
Pending Home Sales Weak in April
The Pending Home Sales Index (PHSI) rose a disappointing 0.3 percent to 106.0 in April, the National Association of Realtors reported Thursday. Economists had expected a 1.4 percent increase to 107.5 from March. The March index was unchanged from the originally reported 105.7.
Last week in a parallel report, the Census Bureau and HUD reported contracts for the sale of new homes increased 2.3 percent to 454,000 in April.
Both the new homes sales and the pending home sales reports measure contract signings and are designed to be forward looking indicators.
With the month-over-month improvement, the PHSI is 10.3 percent above April 2012, the strongest year-over-year gain since October when the PHSI was up 12.1 percent from a year earlier.
The index has improved month-over-month in three of the last four months.
Though designed to be an indicator of future sales-closings, the PHSI does not always line up with the existing-home sales report of completed transactions issued by the NAR.
In March, existing-home sales dropped to 4.94 million from 4.95 million in February even though the PHSI rose in January. Closed transactions rose in both January and February although the pending sales index dropped in November and December.
NAR Chief Economist Lawrence Yun continued to blame tight inventories for the slow moving sales pace.
Soaring Mortgage Rates May Further Weaken House Sales
Encouraging economic data helped lift fixed mortgage rates to their highest level in the past year this week, according to surveys from Freddie Mac and Bankrate.com.
Freddie Mac’s Primary Mortgage Market Survey showed the 30-year fixed rate rising to an average 3.81 percent (0.8 point) for the week ending May 30, up from last week’s 3.59 percent. Since the beginning of May, the 30-year fixed average has jumped up nearly half a percentage point.
The 15-year fixed-rate mortgage (FRM) also soared this week, rising to 2.98 percent (0.7 point) from last week’s 2.77 percent.
Adjustable rate movements were mixed. The 5-year hybrid adjustable-rate mortgage (ARM) averaged 2.66 percent (0.5 point) this week, up from last week’s average of 2.63 percent. The 1-year ARM averaged 2.54 percent (0.5 point), a slight drop from 2.55 percent in the last survey.
“Fixed mortgage rates followed long-term government bond yields higher following a growing market sentiment that the Federal Reserve may lessen its accommodative policy stance,” said Frank Nothaft, VP and chief economist at Freddie Mac.
“Improving economic data may have encouraged those views,” he added, referencing the week’s reports of increased consumer confidence and strong home price gains.
Bankrate’s weekly national survey saw the 30-year benchmark rate rising to 3.99 percent, an increase of 25 basis points week-over-week. The 15-year fixed was up to 3.21 percent.
Meanwhile, the 5/1 ARM rose more than a tenth of a percentage point to 2.81 percent.
On side to housing supply, I wonder who has more rental units in Orange County now, the top 3 big banks or The Irvine Company? Who is the bigger landlord?
I call the banks landlords, but that’s sort of the point of endless loan modifications and “foreclosure order tweaks”.
Speaking of ”squeeze”…
Rate Shock: In California, Obamacare To Increase Individual Health Insurance Premiums By 64-146%
**Impact highest in Bay Area, Orange County, and San Diego
http://www.forbes.com/sites/theapothecary/2013/05/30/rate-shock-in-california-obamacare-to-increase-individual-insurance-premiums-by-64-146/
That’s impossible. Stronger government involvement in healthcare can only lead to lower health care costs for EVERYONE.
Just like education
Good Example
What just happened to mortgage rates?
MBS holders just got their knee-caps…. removed
http://www.mortgagenewsdaily.com/mbs/?Product=FNMA30
4.5% 30-year fixed mortgages by July 1st? It will slow down the bidding wars.
A passing quip this week from a staff member at BofA was telling: When borrowers come to the mothership asking to perform a Short Sale due to hardship, the loss mitigation staff looks at the loanowners capital base and current sales prices, then pushes back an “either / or” option – either you sell at market and make up the difference from your own funds, or we foreclose. The staff member says about 60% of all SS requests are pushed back in that manner. It’s the way it should have been done from the start frankly and high time a hardline was taken.
The days of selling short are likely coming to an end IMHO.
Interesting. Does that mean that in prior years banks were allowing short sales if you had a strong income and/or capital base?
I thought the new law in California prevents delinquency judgements even with refinances?
That sounds like a future post. There is an almost complete absence of short sales on the market right now, and that change in policy at the banks likely explains much of it.
I wonder what would have happened: total property-values collapse (~60%), or collapse of the large banks, or both?
I’m not a fan of pain and suffering, but if you’re going to throw money at people, it would be better to feed newly-homeless middle class idiots than backstop the banking system.
Food stamps are a way better investment in America than TARP or HAMP.
I think the worries of apocalypse are overblown.
Prices declined 70% in Las Vegas. 70%. There was no social disorder, riots, increased homelessness, or any of the social ills everyone believes befalls a community experiencing a crash.
Iceland showed that if the government lets the banks fail, the repercussions are short term, and they quickly resume economic growth.
So following the logic, we should be seeing more properties on the market in the coming months?
If the delay means the banks will make up for lost time, then we might see more supply, but given that they delay for any reason, I think they will just continue to trickle them out and let time solve their problems.
[…] the mainstream media. For example, this is from a recent comment: Soylent Green Is People says: May 31, 2013 at 10:31 am A passing quip this week from a staff member at BofA was telling: When borrowers come to the […]