From Reuters yesterday:
MONTREAL (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan said on Friday that he does not expect another "bubble" in world markets for a long time, and that central banks at any rate do not control the long-term interest rates that can be related to bubbles.
For developments far from the center of town, apparently the potential of a large cobroke isn’t enough to entice agents any more. More and more often, the builders are offering to kick in with gas money- this D.R. Horton offer being the most I’ve seen so far. Usually the builders just offer a one trip gas card: [Thanks L!]
Thinking of putting your house on the market in Stockton, CA? Good luck getting an agent to represent you:
In some areas of California, so many foreclosed homes are available to buy on the cheap that real estate agents are discouraging prospective sellers from even putting their houses on the market.
Perhaps the most extreme example of this is Stockton, about 85 miles east of San Francisco, where roughly three of every four homes for sale are in or on the path to foreclosure.
The city’s resale market is "pretty much gone," said Cameron Pannabecker, owner of Cal-Pro Mortgage.
"I don’t know an agent today who would take your listing unless you’re a hard-luck case. There is just too much competition," Pannabecker said.
Defaults and delinquencies show no sign of slowing:
May 30 (Bloomberg) — Newly delinquent mortgage borrowers outnumbered people who caught up on their overdue payments by two to one last month, a sign that nationwide efforts to help homeowners avoid default may be failing.
In April, 73,880 homeowners with privately insured mortgages fell more than 60 days late on payments, compared with 39,584 who got back on track, a report today from the Washington-based said. Mortgage insurers pay lenders when homeowners default and foreclosures fail to cover costs.
Foreclosure filings surged 65 percent and bank seizures more than doubled in April compared with a year earlier as rates on adjustable mortgages increased, according to RealtyTrac Inc.
Banks continue to be slow to modify loans. The ratio of modified loans to homes going into foreclosure is even steeper- about 1 to 3:
In the first two months of 2008, lenders modified loans for 114,000 borrowers while starting 346,000 foreclosures, according to a study by the Durham, North Carolina-based Center for Responsible Lending. In April, 22 percent of the homes in the foreclosure process had been taken over by lending banks; a year earlier, that figure was 15 percent, according to Irvine, California-based data provider RealtyTrac.
From CNBC’s Diana Olick: [Hat tip L!]
I was moderating a panel of two governors and an economist today on the foreclosure crisis. It was much of the usual stuff until Pennsylvania Gov. Ed Rendell made a bold proposal.
He said that in addition to the legislation making its way through Congress to save troubled borrowers, there should be additional provisions that protect borrowers from having their credit rating destroyed when they go through foreclosure.
I understand where he’s coming from. “This is not for people who took risks,” he says. “This is for people who were legitimately duped by unscrupulous people.”
He wants all those borrowers who were the victims of predatory lending to get a clean, fresh new start, and I can see where that is a very good, sound argument.
It’s just not practical. For many many months I’ve heard many many policy-makers, lawmakers, and decision-makers argue for the good of those poor borrowers who were tricked into faulty mortgage products. They paint a picture of not ignorant, but perhaps uneducated folk who truly believed that they were buying into a sound financial scenario.
But the fact of the matter is that a lot of borrowers, and not just the speculators, went in with their eyes open. They were told that their loans would adjust and that they could refinance based upon the current rate of appreciation. They bought into that appreciation; they gambled on it.
My take is that foreclosure has traditionally not been "fair". Credit scores are not designed to be a measure of borrower’s honesty, but a measure of the risk involved in lending to a borrower. Typical reasons for foreclosures in the past included illness, job loss, death of a spouse- not "failed flips". Lenders have looked at these incidences of financial stress and determined that these problems, however undeserved, raise the risk of default, and credit scores have been gauged accordingly. If borrowers are not sophisticated and are "duped", it seems unlikely that they are a better risk than the speculators.
About the Federal Housing Finance Regulatory Reform Act of 2008 just passed by the Senate:
Buried in the proposed legislation is something new and revolutionary, an effort to stop mortgage walk-aways.
According to author Peter G. Miller:
The Senate legislation addresses the walk away issue by saying that before borrowers can get FHA financing they must certify that they have not intentionally defaulted on any debt, not just their current mortgage. Lying about this issue can be considered perjury, and perjury can result in a jail sentence.
No less important, if a homeowner has walked away from an FHA loan, then the borrower would have to repay the government for any loss on the property — potentially tens of thousands of dollars. In the same way that we should hold lenders to certain standards, borrowers also have an obligation to meet certain requirements. Sending back the keys — creating so-called "jingle mail" — is not fair and it’s not right. The Senate committee has the correct idea: Walking away from a mortgage should not be a free pass to new financing, especially financing insured by the federal government.
Darn those banks, anyway. More and more they are insisting that buyers be able to afford the homes they purchase, and that the homes be worth what is being paid. This isn’t sitting well with everyone:
It’s not that people don’t want homes, it’s that they can’t buy them under the stricter lending standards.
That’s how the National Association of Realtors explains the 17.5 percent drop in sales from April 2007, and eight percent drop in housing prices.
But the problem is worse than even the NAR says it is.
Lenders are turning the clock back to 1975, requiring larger downpayments and higher credit scores to qualify for low interest rates. That’s only prudent, but what they’re also doing is tightening appraisals on properties that are being sold or refinanced.
That’s not all lenders are looking at:
Lenders are no longer dazzled by high credit scores. They’re scrutinizing home sales trends, days on market, debt ratios, and other criteria.
Sales were easier and more plentiful in the boom years when "due diligence" was a quint concept. Current sales may be lower, but at least the sales that are being made should have a lower incidence of defaults. That, in the long term has to be better for market stability and ultimately, home sales.
Thanks to everyone who gave me a heads up, and to G.H. who sent this link to the Arizona Star:
WASHINGTON — The Justice Department gave a boost today to online real estate brokers — and potentially their clients — by forcing new industry policies that give Internet-based agents access to home listings they were previously denied.The tentative settlement, which still requires court approval, could save consumers thousands of dollars when buying a home.Online real estate agents often charge discounted commission fees and let buyers review listings at their own pace.
Essentially the deal requires the 800 multiple listings services associated with the National Association of Realtors for various local markets to give access to Internet-based competitors, the government said.
The real estate group did not acknowledge wrongdoing in the settlement, which it described as a "win" for both consumers and agents.
"We think it’s great," said Lucien Salvant, a spokesman for the National Association of Realtors. "There was no evidence ever brought by the Department of Justice that there was a problem."
Prices of U.S. single-family homes plunged a record 14.1 percent in the first quarter from a year earlier, marking a pace five times faster than the last housing recession, according to the Standard & Poor’s/Case Shiller national home price index reported on Tuesday.
The S&P/Case Shiller composite index of 20 metropolitan areas fell 2.2 percent in March from February and plummeted 14.4 percent from March 2007.
I rarely take a full day off, but when my computer goes out on Memorial Day weekend, I take that as a sign. [Yes I have a spare, but it has issues.] I’m going to just hang with the family for a couple of days.
