Let Housing Lead The Economic Recovery

Considering the depth of these debates and the months of political advertisements in this campaign, it is discouraging that there has not been a serious discussion about housing. As leaders, you ignore housing at our peril.

Dear President Obama and Governor Romney,

Let housing lead the recovery.

We have just witnessed the last of three presidential debates in anticipation of elections now just 2 weeks away. Considering the depth of these debates and the months of political advertisements in this campaign, it is discouraging that there has not been a serious discussion about housing. As leaders, you ignore housing at our peril.

Although the economy is recognized as the single most important issue in this campaign, and housing is commonly blamed for the recession and sluggish recovery, it is unimaginable that relevant solutions to housing issues have not been front and center. Over 3.5 million homes have been foreclosed on in the last four years, another 3 million are likely in the next four, one in 213 homes had a foreclosure filing in the third quarter, and over 10.8 million homes remain underwater with mortgages greater than their market value.

Housing has always led the country out of the dark days of recession, but that has not happened this time. Still, housing does have the ability to promote a stronger overall recovery if it is allowed to do so. But it will take real political leadership in the White House and Congress to acknowledge this fact and take the appropriate steps.

It has been a long and painful road for homeowners and real estate professionals alike, but market performance in recent months has everyone feeling a bit more optimistic. Prices are rising and many underwater homeowners have received a lifeline. But we’re not on solid ground just yet. Significant obstacles remain on the road to recovery.

Simple steps would quickly increase home sales by another 700,000, create over a quarter of a million jobs and deposit millions of dollars into the economy. So, what are the obstacles?

One aspect of the fiscal cliff you have not discussed is the Mortgage Forgiveness Debt Relief Act of 2007, which is set to expire on December 31. If not extended, this has the potential of immediately reducing home sales by as much as 20%. Troubled homeowners who meet the qualifications for a loan modification or short sale are not likely to pursue either of these options if the remaining mortgage balance is considered taxable income.

Many of us in real estate have long been promoting the short sale as a viable alternative to foreclosure. In 2012, short sales began to shed their reputation as a cumbersome and time-consuming process, and their numbers have been steadily increasing. This helped reduce foreclosures and kick-start a struggling housing market. Now, the transaction that serves as salvation for many families facing foreclosure will come to an abrupt halt.

The CBO says a two-year extension will save distressed families about $2 billion. The average debt forgiveness in a short sale is $65,000. How are these struggling families going to pay taxes on this amount? Without debt relief they will eventually be forced into bankruptcy or foreclosure. What will the associated costs to society be then?

In normal times, most of us would never consider forgiving unpaid tax bills, but these are not normal times. It is more important for our country to get housing on a solid footing, put people back to work and have an economy that everyone can be confident in again. Just like a debt relief policy that is more appropriate to another place and time, unrealistic lending standards are also slowing the recovery.

Even with improving home sales, nearly 15% of sales contracts are falling through. This is largely the result of strict lending requirements. Obviously, we’re obsessed with fighting the last war. Today’s lending requirements may have prevented the housing crisis five years ago, but the pendulum has swung too far in the opposite direction. Otherwise creditworthy individuals are being denied or too intimidated to apply for a home loan.

Financing appears to be getting more difficult, not less. In August, the average FICO score of a rejected mortgage application at Fannie and Freddie was 734, two points higher than one year ago. And the average down payment of a rejected applicant was 19%. Historically, these are numbers that would seem like a solid lending risk, but for some reason that’s not the case today.

Additionally, requirements in the Dodd-Frank Consumer Protection Act that would unreasonably define Qualified Mortgages will certainly have the unintended consequences of making mortgages more difficult to obtain and perhaps add to the cost of financing a home. Even the authors of this legislation have said this was not their intent. Our message to you is simple, “first, do no harm.” Do not disrupt the ability of a fragile housing market to positively impact a stalled economic recovery at this critical time. Housing is a powerful economic engine that can easily add a large number of jobs and cash to the overall economy if it is not prevented from doing so.

The Debt Relief Act must be extended, reasonable lending standards established, housing-specific provisions of Dodd-Frank re-examined, and the mortgage interest deduction untouched. These steps will build a solid foundation, restore confidence, and provide clarity to lenders and relief to troubled homeowners. Take these simple steps and watch housing lead the country to real recovery, as it has many times in the past.
President Obama and Governor Romney, you still have time to detail your vision. For many Americans, housing is still a crisis and they are anxiously waiting for solutions.

David Liniger is Co-Founder & Chairman of the Board at RE/MAX. The opinions expressed here are his own. Article from HousingWire.com

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RealtyTrac: 65% of housing markets worse off than in 2008

THIS IS WHY IT IS STILL CRITICAL TO CONSIDER A LOAN MODIFICATION OR A SHORT SALE! WE CAN HELP! 

RealtyTrac measured five key housing metrics in 919 U.S. counties and discovered the majority are still suffering from falling average home prices, unemployment, and higher foreclosure inventories, foreclosure starts and distressed sales.

Sixty-five percent of U.S. housing markets studied by RealtyTrac are worse off than they were four years ago, according to the Irvine, Calif.-based real estate research firm. The results of the survey arrive the same day as the final presidential debate and just weeks before the general election.

RealtyTrac measured five key housing metrics in 919 U.S. counties and discovered the majority are still suffering from falling average home prices, unemployment, and higher foreclosure inventories, foreclosure starts and distressed sales.

Of those counties studied, 580, or 65%, showed results in three of the five metrics as being worse off when compared to 2008 levels. Only 315, or 35%, of the counties had three of five housing metrics with improved performance over four years time.

"The U.S. housing market has shown strong signs of life in recent months, but many local markets continue to struggle with high levels of negative equity as the result of home prices that are well off their peaks. In addition, persistently high unemployment rates are hobbling a robust real estate recovery in most areas," said Daren Blomquist, vice president at RealtyTrac.

"While the worst of the foreclosure problem is in the rearview mirror for a narrow majority of counties, others are still working through rising levels of foreclosure activity, inventory and distressed sales as they continue to clear the wreckage left behind by a bursting housing bubble."

In the majority of the counties studied, home prices are down and unemployment rates are up in more than 90% of the areas. More than half have smaller foreclosure inventories and fewer foreclosure starts than in 2008, while distressed properties make up a smaller share of overall residential sales when compared to four years ago.

Article by Kerri Ann Panchuk from HousingWire.

Housing Market Lingers in Fragile State: Obama Administration

A slight rise in July mortgage delinquencies underscores ongoing fragility in the nation's housing market, the Obama administration said Thursday in its August Housing Scorecard Report.
The Treasury Department said economic data is mixed with the Standard & Poor's/Case-Shiller Home Price Index rising for a third consecutive month in July, while mortgage delinquencies grew slightly, suggesting a weak foundation for significant growth.
During July, 404,000 distressed borrowers received some type of counseling, with 10.9 million borrowers underwater, or owing more than the property is worth, nationwide, according to August scorecard. Furthermore, the government cited statistics showing prime mortgages have a delinquency rate of 4.5%, compared to 33.2% among subprime loans and 12.2% for FHA loans. About 3.65 million existing homes were on the sales block. Mortgage rates during the period averaged 4.22%, down from 4.36% a year earlier.
While mortgage aid programs pushed the number of foreclosure starts and completions down, the administration's housing scorecard said declining foreclosure activity is partly tied to lender processing issues slowing the default process down.
The report said while federal efforts have improved the performances of mortgage servicers, the administration recognizes a need to keep pressure on servicers to reach solutions for troubled borrowers.
"These assessments provide an unprecedented level of information about servicer performance and are designed to help more eligible homeowners walk away from this process with better results," said Tim Massad, assistant secretary for financial stability at the Treasury.
In July, more than 28,000 homeowners received a permanent loan modification through the government's Home Affordable Modification Program. To date, about 790,000 homeowners have received a HAMP modification with the medium payment reduction in the range of 37%.
Write to: Kerri Panchuk.


Full article here.

Have a CitiMortgage home loan? Get PAID Up To $12,000 to Short Sale!

CitiMortgage, the mortgage servicing arm of Citigroup (C: 38.30 +1.78%) is paying borrowers an average $12,000 after completing a short sale this year.
Justin Rand, the senior vice president of loss mitigation at the bank, said servicers are putting more of an emphasis on streamlining the process and pursuing a short sale ahead of foreclosure. The short sale process in 2009 took an average 120 days from listing to close. But by reaching out to borrowers instead of waiting for them to ask the bank, short sales now take an average 83 days to complete, Rand said at a panel for the REO Expo Conference in Fort Worth, Texas, earlier this week.
"For Citi-held portfolio loans today, we have a little over 16% of delinquent loans in a short sale program," Rand said, adding that increased from roughly 4% two years ago.
Not only are the timelines shrinking to complete these deals, but the incentives paid to qualifying borrowers – again only on loans owned by Citi – increased in recent years as well.
In early 2009, Citi offered an average $1,500 to qualifying borrowers. That went up to between $3,000 and $5,000 in 2010 and finally up to an average $12,000 so far in 2011, Rand said.
"Incentives will be offered to customers experiencing financial hardship who need funds to proceed with the short sale," a Citi spokesman said. "The amount, which is agreed upon up front, varies according to the borrower's individual circumstances and loan characteristics. It is disbursed to the homeowner when the sale is completed."
The key to a successful short sale, just like modifications, is the timely collection of financial documents. Regulators helped move the process along with guideline changes to programs like the Home Affordable Foreclosure Alternatives initiative, which lessened the amount of documents required.
"It took us about 30 days to collect documentation in 2009 to now less than 10 days," Rand said. "A lot of the time, for seriously delinquent loans, all we need is just a letter of authorization from the homeowner."
David Sunlin, the operations executive for short sales at Bank of America (BAC: 10.68 +0.75%) was on the same panel as Rand. He said the entire industry is becoming more proactive. BofA completed more short sales than REO every month for the last year and a half. The short sale department at BofA grew from 150 people to now over 3,000. Each employee handles roughly 75 cases.
"We're past the point where we're bumbling around losing files," Sunlin said.
Rand said the big shift began in 2009 as the Treasury Department was putting together plans for the HAFA, which would launch in April 2010.
"In 2009, we started a proactive approach, reaching through MLS services and reaching out to real estate agents and customers with underwater mortgages, distressed loans," Rand said. "We're not going to turn anybody away if the short sale meets the net requirement we're looking for."

Article Here.

Giving Banks TARP Money Did LITTLE For American Taxpayer

After analyzing U.S. personal income and spending, as well as the state of the American economy after a majority of TARP funds have been repaid, industry analysts contend the American consumer is worse off and never benefited from any trickle-down effect from the 2008 infusion of capital into big banks.
In an article ^[1] first published by Reuters, Christopher Whalen, co-founder of Institutional Risk Analytics, explained that even with the Treasury Department recovering ^[2] 75% of the funds allotted to banks under Troubled Asset Relief Program, individuals are still in a jobless recovery and face substantial obstacles after the large-scale bailouts.
"First and foremost, we must subtract the vast flow of subsidies that are still flowing through the income statements of banks and nonbank financial firms, which participated in the government rescue program," Whalen said. "Since 2007, the Fed has pushed the cost of funds for the banking industry down by about $100 billion annually in terms of interest expense, according to the FDIC’s Quarterly Banking Review. This includes reduced interest paid to individual savers and FDIC guaranteed debt issued by banks and the likes of General Electric."
The end result, he said, is the cost to Americans annually "in terms of transfers of wealth from individual and corporate savers to banks and large debtor corporations probably equals all the funds recovered by Treasury and the interest payments on same."
"By my calculations, that puts the American people behind a couple of trillion dollars thanks to the corporate philanthropy of Tim Geithner, Hank Paulson, George Bush and Barack Obama," Whalen said. "Indeed, so generous have Geithner and Obama been to the banks that Wall Street is already filling the Obama reelection coffers. But the real cost to the American people of the TARP bailout and related operations is a no growth economy."
Adding further insult to injury, Paul Dales, senior U.S. economist at Capital Economics, says household finances are weak with real disposable income unchanged in April and data indicated that real incomes have not risen at all this year.
"Put simply, the increase in prices has almost exactly offset the boost to nominal incomes from some decent gains in employment and the payroll tax cut," Dales said.
"Moreover, in order to raise their real spending at a fairly weak annualized rate of 2.2% in the first quarter, households had to dip into their savings. The saving rate fell from 5.4% in January to 4.9% in March and remained at that two-year low in April," Dales said. "This is not too worrying, as rising equity prices probably boosted net wealth in the first quarter. But with equity prices now moving sideways and house prices once again falling as fast as they were at the height of the financial crisis, households may not be able to run down their saving rate much further."
Dales concludes that without a sharp rebound in real incomes, which he doesn't see on the horizon, real consumption growth will lag.

-Kerri Panchuk, Housing Wire