by Jim the Realtor | Aug 23, 2009 | Bailout, Thinking of Buying? |
From the WP Writers Group via the U-T:
http://www3.signonsandiego.com/stories/2009/aug/23/8000-tax-credit-first-time-buyers-set-expire-nov-3/?uniontrib
Here’s a quick overview: Though Congress technically is on its summer break, most members of the Senate and House use part of the August recess to meet with and listen to constituents back in their home districts.
This year, the two biggest housing trade groups — the 1.2 million-member National Association of Realtors and the National Association of Home Builders — are spending the month mounting unusually intense grass-roots lobbying campaigns to make the case for extending the credit, and maybe even expanding it.
On a national basis, according to economists at the National Association of Realtors, anywhere from 300,000 to 350,000 additional sales of houses will be stimulated this year by the credit. Each home sale generates approximately $63,000 in downstream “ripple effects” elsewhere in the economy, they say — sales of furnishings, appliances, lawn mowers, landscaping, renovation materials, plus moving expenses.
If you accept the numbers — and some analysts consider them a stretch — this means the housing credit provides a powerful, immediate stimulus bang for the buck. Failure to extend what may be one of the most effective pieces of the Obama administration’s 2009 stimulus legislation would cost jobs, economic growth and tax revenues, the housing groups argue.
There are some early signs Congress may be getting the message. Bills already are pending in both houses to extend the credit for another year.
Senate Majority Leader Harry M. Reid, D-Nev., whose state has been among the worst hit by the housing bust, reportedly now favors an extension of the credit. He was quoted to that effect by the Las Vegas Sun on Aug. 5, adding, “It’s something we can get done.”
Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee and in a tight race for re-election next year, is co-sponsoring a bill with Georgia Republican Johnny Isakson that would raise the credit amount to a maximum of $15,000. Meanwhile, both the Realtors and the builders are pushing not only for extension of the credit, but for broadening it to cover all home purchases in 2010.
In the end, however, given the political economics of the housing credit, the odds favor some sort of extension, probably later rather than sooner. Don’t bank on a bigger credit, however, or broadening the concept to cover all purchasers next year.
by Jim the Realtor | Aug 6, 2009 | Bailout, Fraud, Thinking of Buying? |
I have been very fortunate to have reporters quote me accurately. But this is stretching it – Forbes called a few weeks ago looking for my thoughts, and while I did say the things below, I said, “I don’t do loan mods, you need to speak to people that do them”.
Today they have this on their website:
In his 25 years as a real estate agent, Jim Klinge has seen plenty of borrowers try to work the system, especially in subprime-scourged North San Diego, where he works and lives. Like many in his industry, he says the Obama administration’s $75 billion loan modification plan is giving rise to another bout of fraudulent mortgage activity. “With all certainty, it’s being gamed,” he says.
I don’t have any specific examples of people doing fraudulent acts to obtain loan modifications. I would think that an in-depth story would state specific examples from those employed in the business. If you can’t find any, then don’t use just the thought as a headline.
The link to the full article:
http://www.forbes.com/2009/08/06/mortgage-modification-obama-business-washington-housing.html
by Jim the Realtor | Jun 15, 2009 | Bailout, Loan Mods |
Here we go again, more government intervention – the latest authored by Ted Lieu, from El Segundo (home of the World Champion Los Angeles Lakers).
Back in February the California state legislators passed the Lieu Foreclosure Prevention Act, and our governor signed it into law.
They should have called it the “In Lieu of Foreclosure Prevention”, because it gives MORE incentive to those who default – an extra 90 days for the lenders to offer loan advice and modifications before filing an NOD. Those who are thinking of defaulting will have close to a year of free rent guaranteed, counting the usual 60 days after the trustee sale.
The law only protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008. The time remains at 90 days for all other loans.
Lenders can avoid the 90-day moratorium if they have a loan modification program in place that is based on the FDIC’s program.
The law goes into effect today, so it’ll be interesting to see if the lenders sent out a bunch of NODs over the last couple of weeks.
by Jim the Realtor | Jun 13, 2009 | Bailout |
From the U-T:
A $100 million new-home state tax credit is likely to be exhausted within days, prompting builders to press legislators to add $200 million to the kitty.
Valued at up to $10,000 per buyer, the credit was passed in March as a way to clear out unsold inventory at California housing tracts and to jump-start new construction. The state Franchise Tax Board said yesterday that 9,145 buyers had claimed $88.3 million in credits, leaving less than $12 million available. The California Building Industry Association said that means the funds could all be spoken for within about 10 days.
“We knew the tax credit would be successful, but we had no idea it would be this successful or that funding would run out in just four months,” said Tim Coyle, the association’s senior vice president. He said three bills are making their way through the Legislature to add $200 million to the tax credit fund. One already has been passed by the Assembly, he said.
“We’re pushing very hard to get this done in the next two weeks,” Coyle said.
The tax board estimates that the credit might actually cost the state only $59 million rather than $100 million because so many buyers will not qualify for the $10,000 maximum.
With building permits up from year-ago levels, the builder group says every new home built generates about $16,000 in state and local taxes, thereby offsetting whatever the credit costs. Coyle said these calculations are causing many lawmakers to look favorably on an expansion of the credit, which is due to expire in March. It comes on top of an $8,000 federal tax credit available to first-time home buyers, who can apply that credit to new or existing homes.
“I’ve never seen such strong bipartisan support for a housing bill,” Coyle said.
He acknowledged that legislators are simultaneously wrestling with a potential $24 billion state budget deficit.
“The big question is, can the tax credit be extended within the budget constraints the state is under? That’s what we’re working on,” Coyle said.
by Jim the Realtor | Jun 5, 2009 | Bailout, Thinking of Buying? |
HT to shadash for sending this in, from WaPo:
The rush of capital into the banking industry over the past month is allowing firms to postpone the painful process of selling devalued mortgages and other troubled assets, a step many financial experts still consider necessary to fully revive lending.
The Federal Deposit Insurance Corp. said Wednesday that it would suspend indefinitely the launch of a program to finance investor purchases of banks’ troubled loans because few companies were interested in selling. A related Treasury Department program to finance purchases of mortgage-related securities remains on the drawing board months after both were announced with fanfare.
The FDIC decision marked a victory for the banking industry, which has argued that such a program would transfer profit from banks to investors at public expense. It also showed the limits of the government’s ability to impose its will on the banks. Regulators generally cannot compel firms to sell assets, and the inflow of private capital has undermined the argument that the banks must take urgent steps to get healthy.
But FDIC Chairman Sheila C. Bair said yesterday that the best course for banks, and for the broader economy, remained a combination of raising new capital and shedding old problems. She said that the FDIC would continue to prepare to help banks sell assets.
“It is preferable to get them to sell assets in combination with raising capital in order to get the banks to be in a better position to start lending again,” Bair said in an interview. “Getting them off the books is a cleaner posture for the banks.”
Fifty financial companies raised almost $50 billion from private investors in May, more than in the previous six months combined, according to analysts at investment bank Keefe, Bruyette and Woods.
The surprising success defied widespread predictions, including by senior government officials, that investors would be scared away by the unpredictable magnitude of eventual losses on troubled assets. It has also dramatically reduced the need for additional federal investments in the largest banks. The 10 companies identified by federal stress tests as needing deeper reserves against losses must submit plans to the government next week, but it is likely that only two, Citigroup and GMAC, will require additional government aid.
Link to full article:
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/04/AR2009060404436.html?nav=rss_business
by Jim the Realtor | May 29, 2009 | Bailout, Thinking of Buying? |
From today’s Union-Tribune:
By ALAN ZIBEL, The Associated Press
12:24 p.m. May 29, 2009
WASHINGTON — Thousands of first-time homebuyers will be able to get short-term loans so they can quickly make use of a new $8,000 tax credit to pay for some of the costs of buying a home.
The Federal Housing Administration on Friday released details of a plan in which borrowers who use FHA loans can get advances from lenders that let them effectively receive the credit in advance, so they don’t have to wait to get the money from the Internal Revenue Service.
Most borrowers will still have to come up with the FHA’s required 3.5 percent down payment, unless they work through a state or local housing agency or an approved nonprofit. Ten states have such programs in place, according to the National Council of State Housing Agencies.
But there are many other potential uses, such as for closing costs and fees, or to beef up the down payment beyond the minimum level.
The FHA which insures about a quarter of new home loans, is projected to guarantee about 2.2 million loans in the next budget year.
Any buyer who has not owned a home in the past three years is considered a first-time buyer and eligible for the program. Borrowers can claim the credit by filing an amended 2008 tax return or can wait for their 2009 return.
The change “will present an enormous benefit for communities struggling to deal with an oversupply of housing,” Housing Secretary Shaun Donovan said in a statement.
The tax credit was included in the economic stimulus package signed by President Barack Obama in February. It is not available to individuals with incomes above $95,000 or couples with incomes above $170,000 and expires Nov. 30.
Real estate agents and homebuilders generally welcomed the change. Jerry Howard, chief executive of the National Association of Home Builders, called it a “great step in the right direction.” On Wall Street, shares of such builders as Toll Brothers and D.R. Horton rose on the news.
Still, some real estate agents were concerned that many buyers won’t benefit at all if they can’t use it for a down payment – a big hurdle for many first-time buyers.
by Jim the Realtor | May 8, 2009 | Bailout |
The Senate voted 91-5 in favor of the Helping Families Save Their Homes Act of 2009 (S896), which includes legal protection for servicers that modify residential mortgages. Five Senate Republicans voted against the housing bill.
The safe harbor protects mortgage servicers from lawsuits by investors holding relevant modified mortgage bonds.
The provision is intended to encourage more servicers to modify more mortgages, but critics say it will hurt private investors whose funds help maintain banks’ liquidity and stimulate lending.
Modifications often involve altering original mortgage terms and forbearing a portion of the principal for lump repayment at the end of the loan life. The reduced principal lowers monthly payments, increasing affordability for borrowers and consequentially reducing the monthly return for investors.
If the mortgage is securitized, then the principal payment coupons, or pass-throughs, will also take a hit. For the long investor, change to term is a bad thing and likely to shake-up an already nervous financial market.
However, the aim of the bill essentially provides legal protection for servicers to alter mortgage contracts and, as the argument goes, investor contracts where mortgages have been securitized.
The bill also changes the borrower certifications under Hope for Homeowners, a program that encourages refinancing into Federal Housing Administration-guaranteed mortgages. The bill’s changes mean borrowers going forward must provide proof they didn’t intentionally default on their mortgage in order to qualify.
The bill provides the Federal Deposit Insurance Corp. with increased borrowing authority, extends the time period for restoration of the insurance fund from five to eight years, provides a temporary extension of the FDIC’s $250,000 deposit insurance limit. Supporters of the bill say these changes will bolster confidence in the FDIC and meet banks’ lending needs.
“During this time of economic uncertainty, bankers recognize the importance of maintaining public confidence in the FDIC,” American Banker Association executive director Floyd Stoner. “We also believe that it is important to strike the right balance between maintaining a strong deposit insurance fund without unnecessarily taking money out of the system.
Written by Diana Golobay, from Housingwire.com
by Jim the Realtor | May 1, 2009 | Bailout, Loan Mods |
From HopeNow’s press release:
Washington, D.C. (April 30, 2009) – HOPE NOW, the private sector alliance of mortgage servicers, non-profit counselors, and investors that has been working aggressively to prevent foreclosures and keep homeowners in their homes, today announced that its members and the larger mortgage lending industry modified 134,000 mortgages in March.
This was the second consecutive month the lending industry completed this many modifications. Since September 2008, the industry has been averaging 116,000 modifications per month.
The industry also completed 115,000 repayment plans in March, up slightly from February. The combination of 134,000 mortgage modifications and 115,000 repayment plans means that, in March 2009, HOPE NOW members and the larger mortgage lending industry provided 249,000 homeowner solutions through these two options.
The HOPE NOW March data does not specifically break out the impact of the Obama administration’s recently announced Homeowner Affordability and Stability Plan, which has just begun to be implemented. According to Faith Schwartz, HOPE NOW’s executive director, “The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes,” she said. “I expect that these numbers will continue to increase as servicers work with the Obama Administration to implement its Homeowner Affordability and Stability Plan,” she added.
The HOPE NOW March data shows:
• Modifications were more than half of all solutions provided to homeowners.
• The number of completed foreclosure sales declined by 39 percent, from 87,000 to 53,000 in March, the lowest number since December 2007.
• Foreclosure starts, increased from 243,000 in February to 290,000 in March. This is the highest number of initiated foreclosure actions since HOPE NOW began tracking data in 2007 and is a 20 percent increase from February.
Michael Bright, HOPE NOW’s chief statistician, said the sharp reduction in completed foreclosure sales in March may have been because servicers allowed troubled loans to be run through the HASP program. “It’s too early to say this is a trend,” he said. “But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes.”
They tinkered with (at least temporarily) 249,000 loans, but the 290,000 new foreclosure starts will likely overwhelm the lenders and servicers. I heard yesterday that Chase has 60,000 short sale requests that they haven’t even inputted onto their system yet.
by Jim the Realtor | Apr 28, 2009 | Bailout, Short Sales |
The lenders have received numerous requests for loan modifications.
But many borrowers don’t qualify, for various reasons:
1. Too far underwater.
2. Lousy financial package (make too much $$, make too little $$, incomplete pkg., etc.).
3. Not primary residence.
4. Not a qualified loan program (not Fannie/Freddie, etc.).
The lenders/servicers are having to review each package, order appraisals, and make a decision.
If the borrower is denied, they are faced with either keeping their word and making their existing payments, or throwing in the towel. The second choice means ride out the free rent while getting foreclosed, or try for a short sale.
Both options will be costly to the lender.
The lenders have the loan mod package in front of them. If denied, should they just go ahead and pre-approve the short sale?
On one hand, if they were proactive and offered a pre-approved short sale, they could efficiently resolve the case.
If part of the package included a demand that the seller had to vacate, the short sales could compete with REOs – right now the REOs are pummeling the short sales in selling efficiency.
Selling these homes faster and easier should mean more net proceeds to the sellers.
On the other hand, wouldn’t more borrowers take advantage of the system?
I think there are lenders out there that are contemplating this very question.
What should they do?
by Jim the Realtor | Apr 23, 2009 | Bailout |
Does this bother you? From the WSJ:
WASHINGTON — Troubled financial institutions and the Detroit auto makers continue to spend heavily on lobbying Congress while accepting billions of dollars in U.S. government money, reports to Congress suggest.
General Motors Corp. spent $3.3 million on lobbying in the fourth quarter of 2008, a period that coincides with the government committing $13.4 billion to the ailing auto maker under the Treasury’s Troubled Asset Relief Program. In all of 2008, GM spent $13.1 million on lobbying, down from $14.3 million in 2007. GM’s reported lobbying expenses for 2008 were only slightly less than combined spending by Ford Motor Co. and Chrysler LLC.
“Lobbying is the transparent and effective way that GM has its voice heard on critical policy issues…that companies should not be required to forfeit if they receive federal funding,” said GM spokesman Greg A. Martin, who added that no funds lent from the Treasury would be used for lobbying.
Bank of America Corp., whose heavy losses prompted it to appeal to the government for a second bailout this month, spent $4.1 million on lobbying last year, nearly $1 million more than in 2007. The bank spent $820,000 on lobbying in the last quarter, about one-fifth less than in the third quarter. Bank of America is in line to receive a total of $45 billion from the government, including $20 billion committed by the Treasury this month.
Merrill Lynch & Co., which was acquired by Bank of America Jan. 1 at the government’s urging, spent $1.2 million on lobbying in each of the last two quarters, and $4.7 million for the year, $280,000 more than it spent in 2007. Merrill’s losses last year were another reason why Bank of America appealed for a second injection of taxpayer money.
“Our last year numbers reflect to some degree costs resulting from our merger with Countrywide,” said Shirley Norton, a spokeswoman with Bank of America. “We are now reducing our lobbying expenses…consistent with bank-wide efforts to reduce expenses.”
When the U.S. placed government-sponsored mortgage giants Fannie Mae and Freddie Mac into federal conservatorship in August, the two entities, once among the financial services industry’s biggest lobbying spenders, were required to stop lobbying. In October, American International Group Inc., which is nearly 80% held by the government, said it would voluntarily stop federal lobbying after criticism from Congress. But Congress has placed no similar restraints on other recipients of taxpayer money, though some lawmakers favor that.
“Clear restrictions must be imposed on firms receiving assistance,” said Sen. Dianne Feinstein (D., Calif.). “These include tougher reporting requirements, lobbying prohibitions, and a ban on lavish and unnecessary expenditures,” she said.
Lobbying spending by GMAC LLC, GM’s auto- and mortgage-lending arm, more than tripled to $4.6 million in 2008 from 2007. GMAC has received $6 billion in government money to help stave off a financial crisis. GMAC has suffered heavy losses in its mortgage unit, Residential Capital LLC, or Rescap. GMAC spent $1.5 million on lobbying in the fourth quarter, about $400,000 less than in the previous quarter. GMAC is 51% owned by private-equity firm Cerberus Capital Management LP, which also controls Chrysler.
Toni Simonetti, GMAC’s vice president for global communications, said the firm spent more on lobbying last year because it was lobbying on more issues than before. “I think it’s obvious that the increased spending on Washington-related activities was related to the environment and the restructuring that we are going through,” she said.
Chrysler spent $1.2 million on lobbying last quarter, and $1.9 million on lobbying in the third quarter. The White House committed $4 billion in loans to Chrysler in December.
“There has been significant demand from legislators and government officials for education and information on Chrysler,” said Mary Beth Halprin, a company spokeswoman.
Ford spent $1.9 million on lobbying in each of the last two quarters. It spent $7.7 million on lobbying for all of 2008, about $600,000 more than in 2007. Ford’s Washington spokesman Mike Moran said that although the company didn’t take government money and says it doesn’t need it now, it joined the other two domestic auto makers in pressing for a government rescue. “Should one of the other companies falter, that would have an impact on the entire auto industry,” he said.
Congressional filings show that lobbying by American International Group, which the government took control of in September, continued in the fourth quarter, despite the government’s holding 78.8% of the company. Congressional filings show that AIG spent $1.08 million in the fourth quarter. AIG’s 2008 lobbying spending was $9.5 million, $1 million less than in 2007.
AIG spokeswoman Christina Pretto said the company’s fourth-quarter figures include spending on state-level lobbying and trade-association activity. AIG stopped federal lobbying after criticism by Congress in October, which was the reason for the 2008 decline in spending, she said. The company continues to lobby on insurance issues and legislation at the state level, but activities must be approved by the company’s general counsel and chief regulatory and compliance officer, she said.
In October, after the Wall Street Journal reported that AIG was lobbying states for more favorable interpretations of a law that would place new controls on mortgage originators, Sen. Feinstein and Republican Sen. Mel Martinez of Florida introduced legislation that would ban recipients of taxpayer money from lobbying. The two lawmakers are seeking sponsors for a House version of the bill.
Here’s a quick overview: Though Congress technically is on its summer break, most members of the Senate and House use part of the August recess to meet with and listen to constituents back in their home districts.
