BluefoxToday blog

Home Affordable Modification Program, or more commonly HAMP, was rolled out to allow mortgage lenders and servicers to make available trial modifications to an estimated 3 to 4 million homeowners.When Treasury announced its birth it raised hopes among not only mortgage borrowers in trouble but also government officials who frantically tried to bring the collapsing housing market back to its feet and with that give the badly-mauled banking sector something more concrete to lean on. But things haven't turned out all that well with HAMP.

At least that's what SIGTARP says. SIGTARP is another wonderful acronym - among so many - that has risen to fame on the heels of the memorable finance and real estate crash and stands for Special Inspector General for Troubled Asset Relief Program. That's a long one. In short, he is - could be a she too - tasked to monitor the government's massive struggle to bring reasonable order to the shaky national banking system and the besieged housing realm.

SIGTARP refers to the 389,198 permanent mortgage modifications HAMP has thus far managed to generate, as was recently reported by Treasury.This of course is far less than what the original plan of at least doing 3 million of them called for. One thing is that HAMP is an ongoing process and perhaps when it's all said and done that plateau can be reached. But, frankly, it probably won't happen.

For one, due to high mortgage redefaultrates under HAMP underwriting guidelines have been tightened leading to scores of cancelled trial and permanent modifications.It is greatly lowering the potential candidate pool. Short sales are making serious inroads as a viable option for many struggling home loan recipients. Doing a HAMP requires a lot of paperwork and patience and many are willing to take their chances with short sales.

The underwater menace seems to come into play with HAMP, too.Its malicious impact is somehow going to touch all corners of the housing enterprise. When a homeowner is sufficiently underwater he can be essentially convinced that making those lower HAMP payments for years on end still won't pull him out of the negative equity hole anytime soon, so he clearly has little incentive to apply for HAMP. Lower payments are great, but where is the equity? After careful consideration many choose to just simply walk away from their mortgages.

Besides, mortgage lenders generally haven't been all that enthused, for one reason or another, about putting their arms around the program either.HAMP appears to have suffered from clearly-defined goals, as SIGTARP claims, but also from rapidly shifting real estate market conditions. With more assertive administration Treasury could have streamlined its direction and possibly been more efficient in the use of taxpayers' money.  

Las Vegas Area July 15, 2010 Active Listings by Type

• REO:  2476 (21%)
• Short Sale:  5231 (45%)
• All Other:  4009 (34%)

June 2010 Sales by Type:

• REO:  1625 (40%)
• Short Sale:  1416 (34%)
• Other:  1085 (26%)

This is just a guide for consumers to see what types of properties are closing vs what is listed.  Currently we have the most closes in the REO sector and the least inventory in the REO sector and it is an extreme seller's market.

Click here to see last month's Listing and Sales Type Report

Click here to view the most recent stats (scroll to bottom)

An article in the Wall Street Journal, Housing Market Stumbles, describes how home sales seem to be deteriorating, but it isn’t just a stumble; the housing market has fallen and won’t get up. The WSJ piece projects the dreaded “double-dip” in housing, a prediction that has grown more popular in recent weeks.

What most seem to overlook, however, is that the fundamentals of housing are being rearranged. The overall market was never truly in recovery; the brief periods of upward momentum were, in general, a response to an artificial stimulus applied by government—a stimulus which was neither permanent nor productive.

With the numbers of new home starts falling, with housing inventory rising, and with the potential for several million additional foreclosures, the housing market is entering a new phase where the old rules no longer apply. Past statistics regarding recovery from recession are meaningless, for the current recession has little in common with those of the past. And those who have homes to sell, those who wish to purchase a home, and those in real estate related businesses must adjust to the fundamentals of this market.

While some areas of the country have seen improvement—markets in the northeast and parts of California—other areas, especially those with the potential for additional foreclosures, are still experiencing weak demand and falling prices. Those needing to sell their home will have to market and price more aggressively; prepare for a longer period on the market; and will have to be flexible to micro-changes in their market.

An anemic job market, expected to continue well into the decade, has changed housing for the foreseeable future. And those areas with double-digit unemployment can expect additional price declines. Nationwide, prices should remain well below the levels of recent years; and, with few exceptions, appreciation will be minimal.

What we’re experiencing is not a double-dip in housing, not a “stumbling,” but a market experiencing a fundamental adjustment downward. With the current and projected absorption rates, we’re likely to have high levels of inventory for several years; and if we add in the indeterminate number of future foreclosures, structural and fundamental changes seem unavoidable. The potential inventory of homes must decline to levels appropriate for the current and anticipated absorption rate—an event unlikely in the short term—in order to begin a recovery; and until that occurs, the housing market has fallen and won’t get up.

The Housing Guru: The expert source for all your housing questions

Lenn Harley wrote a blog on Sunday in which she rightfully questioned the accuracy of what was being stated on another blog about Pre-Approval Letter. The writer of the blog that Lenn was questioning, stated that her Loan Officer had informed her that he would no longer be able to provide her with a Pre-Approval Letter for her Buyers because of restrictions imposed by RESPA. This information was incorrect, Pre-Approval Letters are very much alive and well. But before I go any further let me give three very quick definitions of what I consider a Pre-Qualification Letter, Pre-Approval Letter, and a Loan Commitment Letter. Keep in mind that these are MY definitions, and MY opinion. 

• Pre-Qualification Letter: Loan Officer pulls credit, and inquires about income and maybe bank information. From that the Loan Officer makes a quick determination as to whether the Borrower could possibly qualify for a Loan up to a certain dollar amount.
  
• Pre-Approval Letter: Loan Officer pulls credit, inquires about income and bank information, takes a full Loan Application, may or may not collect some documentation like paystubs. Runs all this information through DU or LP along with a hypothetical Sales Price, and looks for an Approved/Eligible or Accept.
  
• Loan Commitment Letter: The Loan Officer does everything that he or she would do if there was a property, pulls credit, collects all necessary documents, Borrower signs a Loan Application along with disclosures, and everything is submitted into Underwriting. Everything that would be done for an actual Loan would be done except for an Appraisal, because there isn't a property yet. The Underwriter then issues a Loan Commitment Letter up to a certain dollar amount, based on a property being able to appraise later once a property is found.

Again these are MY definitions, other Loan Officers will have their own, including equating a Pre-Qualification Letter to a Pre-Approval Letter, because that is what they do for their Pre-Qualification Letters. You need to find out what your Loan Officer means when he or she uses those terms.

Having said all that, why would a Loan Officer make a statement like the one made in the blog mentioned above? The reason is that if a Loan Officer takes six pieces of information from a Borrower, RSPA requires him to then issue a Good Faith Estimate (GFE), because those six things constitute an Application in the eyes of RSPA, and they HAVE TO issue a GFE within 3 business days or be in violation. The six things are:

• Borrowers Name
• Social Security Number
  
• Income
  
• Property Address
  
• Estimate of Value of Property
  
• Loan Amount

So why would issuing a GFE present a problem? The problem is that with the new GFE that went into affect at the beginning of the year (which has its own problems, but that is another blog) the Lender is locked in to some of the figures (Lender Fees) for 10 days, and for some of the Fees they only have a 10% flexibility. Lenders are hesitant about being put in that position, especially since there is no property yet, and the Borrowers Credit Scores could change by the time a property is found, which might require Points to be charged.

If a Lender does not want to issue a Pre-Approval Letter, because they don't want to run the risk of having to issue a GFE and be locked into those fees, then they should be upfront and just say so, and not create a Myth that RESPA does not allow them to do so.

The other reason why a Loan Officer might say something like that is because they want to play with the Fees. Use a low figure to get a Borrower to go with him or her, and then tack on higher Fees and Points once the Borrower is ready to put a loan into process. Most of those games have gone away, but they do still exist.

If your Loan Officer will not give you a Pre-Approval or Pre-Qualification Letter for a Borrower, or if you are one of those who feel that a Pre-Approval Letter or Pre-Qualification Letter is worthless, then you need to find another Loan Officer, who will produce one that you can trust.

Most of my business comes from referrals from Realtors, so I am very careful about what I issue. When I issue a Pre-Approval Letter it is worth FAR MORE than the paper it is written on, and the only way that Borrower will not be approved for a loan, is because something that could not be foreseen at the time of application, later pops up.

Get your Buyers Pre-Approved by a trusted Loan Officer as early in the process as possible, and DO NOT accept the Myth that you cannot be given one!!!

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Real estate market observers have mixed feelings about RealtyTrac's Midyear 2010 Foreclosure Report. It says that 1,654,634 homeowners were sent at least one mortgage foreclosure filing from January through June. That translates to over 3,000,000 by the end of the year and RealtyTrac forecasts that over 1 million of them will eventually become repossessions, or REOs - real estate owned. The number by itself is of course alarming, but the current six month number actually is a drop of 5% from the second half of last year. Ordinarily in any housing enterprise that would be something to feel upbeat about.

On closer look the home loan picture isn't all sweet grapes and chocolate treats after all. Mortgage lenders and servicers have lately changed course to give a short sale a chance to work before filing foreclosure notices. The government has aggressively promoted its mortgage loan modification programs that have had a preventive impact despite the private sector's reluctance to get fully engaged. Yet, these initiatives have been a disappointment when measured by their originally announced goals. Moreover, mortgage lenders often are disorganized and undermanned to handle the torrent of foreclosures and their workforces seem to lack the necessary training to be effective, therefore foreclosure action can be delayed for months.

These factors have shifted the emphasis away from mortgage foreclosure statistics and are obviously responsible for the 5% decrease. In the meantime distressed properties continue to saturate unabated the landscape from Las Vegas to the shores of Florida. A great many are underwater and are hard-pressed to find any meaningful relief in the near future. The job situation is slowly improving at least in some regions but still isn't strong enough to decisively begin lifting struggling homeowners to their feet.

Nevada maintains the dubious top spot on the list of most foreclosure filings with almost 6% of all households receiving one at the midyear mark. In pure numbers that is 64,429 homes, a bunch really. Arizona came in second with 3.36%, followed by Florida at 3.15%. California registered a score of 2.54%, rounding out the four states that have been dominating this difficult statistic from the beginning of this historic real estate collapse.

The underwater problem will likely be a drag on the housing market for longer than anyone can imagine. But, there appears to be one relatively fast cure for it should the decision makers in Washington - like the Fed and Treasury - have the backbone and political support to give it a try. It's called inflation. With a steady dose of that often-ridiculed medicine home prices ought to begin tip-toeing upward, preferably at a controlled pace. In time it would pull homeowners out of the abyss and give them real equity again that would make them feel better about a lot of things. In addition, banks and investors now smelling the offensive odor wafting from their mortgage portfolios would see a gradual change to that downright embarrassment. Just an idea.

Photo of the Fed by stantoncady

Inventory is increasing RAPIDLY.  This may be due to the first time buyer's tax credit expiring.  This is also good news as we could emerge from the extreme seller's market that we have been in for over a year to a stable market in about 8 months (with a consistent increases like the ones we have seen this month.)

Las Vegas Area Market Activity (Includes North Las Vegas, Henderson and Las Vegas)

• Listings (7/15/2010):  11716
• Under Contract (7/15/2010):  14628
• Sold June 2010:  4126

Short Sales:

• 45% of Listings
• 34% of Sales

REO (Foreclosures, Bank Owned:)

• 21% of Listings
• 40% of Sales

In One Month:  Listings are UP +1168 units, Contracted Listings DOWN -1120, Sales are UP +613 units.  Close ratios are going lower because much of the pending inventory is short sales which requires LONGER close times. 

 DOWN PAYMENT ASSISTANCE HAS NOT ENDED FOR FIRST TIME BUYERS, HOWEVER!!

Last Month's Pending Report

The absorption rate for Las Vegas Valley Area Short Sales is finally seeing movement. Inventory has INCREASED by +672 units.  Under Contract has DECREASED by -925 units.    Sold units have INCREASED by +377 units.

There are many reasons for the lack of closings in this market and it is outlined in this post. 

Short Sale Synopsis:

• Listings 7/15/2010: 5231
• Pending 7/15/2010: 10460
• Closed June 2010: 1416

Short Sales Currently Account for:

• 45% of All Las Vegas Valley Listings
• 35% of All Las Vegas Valley Sales 

Read here for last month's report on Las Vegas Area Short Sales.

If you need to sell your home through the short sale process, you can either fill out the form on this page or you can call 702-966-2494 and press option 0.

Trend and Forecast in Mortgage Rates on July 16, 2010 - Improving, or...?

Here are some of the events affecting mortgage rates today:

What Mortgage Backed Securities (MBS) Are Doing Today:

• The price of the FNMA 30-Year 4.0% MBS coupon opened at 101.72 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.0% MBS coupon was trading at 101.69 - down 1/32 from its opening.

Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be about the same in price this morning as compared to yesterday.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 6-16-2010 to 7-16-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• Consumer Price Index (CPI) - as expected, the overall price index fell by 0.1% in June - mostly because of lower gasoline prices. The core data which excludes the more volatile food and energy prices rose 0.2% - slightly more than expected. This is one of the most important monthly reports that we see as it measures inflationary pressures at the consumer level of the economy. With unemployment still at high, this report shows that inflation continues to be held in check even as the overall economy is improving. This report had no impact on the mortgage market or mortgage rates this morning.
  
  
• University of Michigan's Index of Consumer Sentiment - came in with a reading this morning of 66.5, much worse than expected, indicating that consumer sentiment is waning. The past 3 readings were 76.0 in June, 75.5 in May, and 73.3 in April. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. While this report indicates that consumers are not as likely to make large purchases soon, mortgage rates improved this morning as investors took money out of stocks and invested in bonds.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past 3 years:

Mortgage Rate Lock Advice:

Mortgage rates are at their historic lows - and haven't been this low since the early 1950s. They could possibly go even lower as the global economic crisis continues. However, the stock market is over sold while the bond market is over bought, and rates could begin to head up soon as the markets begin to correct themselves. As such, I would not risk the chance waiting for lower mortgage rates. That being said, rates continue to slowly fall. As such, I would float and be ready to lock at a moment's notice.

If I were financing a home or refinancing a mortgage today, I would:

• Float if my closing was taking place within 7 days
• Float if my closing was taking place between 8 and 15 days
• Float if my closing was taking place between 16 and 30 days
• Float if my closing was taking place more than 30 days from now

Be sure to check out today's mortgage rates.

Las Vegas Area Sales by Type - The History of the Last Year!

This report is a special request from a lender collegue.  I am going to include it in my regular Las Vegas Area Listings & Sales by Type Monthly Report HOWEVER I think the first one deserves special attention and it's own post.

REO - Real Estate Owned and is commonly known as "Bank Owned" Property.

REO sales are down for a myriad of reasons and the main reason is due to the lack of inventory.  It isn't because people don't want to buy them - in fact that is quite the opposite - buyers WANT THEM :)

REO inventory has been a shell game.  First of all look at the chart and see that "standard sales" and "short sale" sold units have increased dramatically.

Short Sales are mainly pre-foreclosure sales and most of them are in default and the pre-foreclosure stage.  REO inventory gobbled up there.

Another way REO inventory is getting gobbled up BEFORE it goes REO is investors purchasing at trustee sales (the actual foreclosure sale.)  Read "Las Vegas Area Trends:  The Trustee Sale Flip is the New REO."  I wrote that in February.  Trustee Sales by private investors was reaching a fury with the tax credit first time buyers out there seeking to purchase a property.  Since the tax credit has expired, we are seeing more foreclosures going to REO rather than the private investors.  Some of these trustee sale purchases by private investors get immediately relisted in the "standard" sale category as flips, some are being held and some are being rented and some are being occupied by their new owners.

Unfortunately Las Vegas Area Foreclosures & REO weren't dead, nor will they be for a long time.  It's just playing a little shell game (selling via different sale types) and the inventory will continue to shift under these categories over the next several years!

Mountain's Edge June 2010 Real Estate Resale Market Report:

• Listings (7/15/2010):  249
• Under Contract (7/15/2010):  325
• Sold June 2010:  88

Since Last Month:  Listings are UP +60, Pendings are DOWN -66, Sales are DOWN -2

Last Month's Mountain's Edge Real Estate Market Report

Mountain's Edge is a newer community so many of the listings are short sales or bank owned.