Archive for September, 2009
LOAN MODIFICATION ATTORNEYS UNDER INVESTIGATION
The State Bar of California has recently launched numerous investigations against attorneys for misconduct related to loan modifications. In a rare move, the State Bar has released the names of 16 attorneys under investigation, by opting to waive investigation confidentiality in favor of public protection. These attorneys have allegedly taken fees for promised services, but failed to perform those services or even communicate with their clients who face the possible loss of their homes. Their non-attorney staff may also be under investigation for unlawfully practicing law.
Not all attorneys engaged in loan modifications are unscrupulous.
However, this announcement from the State Bar serves as a good reminder for REALTORS® and their clients to be careful when dealing with attorneys and others for loan modifications. Scam artists may intentionally associate or affiliate themselves with attorneys in an attempt to lend credence to their fraudulent schemes. The list of attorneys currently under investigation is available at
http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395
FDIC says bank failures to cost around $100B
Federal regulators said Tuesday they expect bank failures to cost the deposit insurance fund about $100 billion in the next four years and the fund to begin running at a deficit this month.
That is higher than an earlier estimate of $70 billion in failure costs through 2013.
The Federal Deposit Insurance Corp. made the projections as its board voted to propose requiring banks to prepay an estimated $45 billion in regular insurance premiums for 2010-2012. The proposal could take effect after a 30-day public comment period.
“I do think this is a good balance,” FDIC Chairman Sheila Bair said. The plan requires the banking industry “to step up” while spreading the financial hit to banks over a number of years, she said.
The insurance fund has been sapped by billions from a rash of bank failures that began in mid-2008. The banking industry prefers that option over a special emergency fee — which would be the second this year.
It was the first time the FDIC has required prepaid insurance fees.
Bair didn’t rule out the possibility of the agency tapping its $500 billion credit line with the Treasury Department, if the economy doesn’t stage a full recovery. However, there is a recognition in the banking industry that “everybody’s got bailout fatigue,” she said
Ninety-five banks have failed so far this year as losses have mounted on commercial real estate and other soured loans amid the most severe financial climate in decades. The insurance fund fell 20 percent to $10.4 billion at the end of June, its lowest point since 1992, at the height of the savings-and-loan crisis. The fund has now slipped to 0.22 percent of insured deposits, below a congressionally mandated minimum of 1.15 percent.
Amherst Sees 7m Foreclosures Poised to Distress House Prices
Recent analysis by the Amherst Securities Group indicates the housing industry will not only worsen as a delayed pipeline of foreclosed loans begins to liquidate, but that the Administration’s Making Home Affordable Modification Program (HAMP) will have no lasting effect on keeping delinquent loans current.
The early signs of stabilization seen among housing industry observers may soon recede as an overhang of the shadow inventory of foreclosures waits to enter the market.
The general outlook that the housing market has bottomed is “premature” optimism, according to analysis this week from Amherst.
“The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate,” analyst Laurie Goodman said in an insight report Wednesday.
Amherst estimates this “shadow inventory” at around 7m housing units, or 135% of a full year of existing home sales, compared with 1.27m units in this bucket in early 2005. The backlog is due to high transition rates, low cure rates and a longer timeline for loan liquidation — in other words, loans continue to transition into the delinquency/foreclosure pipeline at a rapid pace, but are moving out at a very slow pace.
The loans, however, are “destined to liquidate” and will impact the signs of recovery seen in recent months by pulling down house prices through distressed sales.
“We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary,” Goodman added.
Despite positive signs of house price stabilization and rising new and existing home sales, existing loans continue to deteriorate in performance, as Amherst noted a “staggering” 13.5% delinquency/foreclosure rate in a Q209 survey by the Mortgage Bankers Association (MBA).
Cure rates for these distressed loans remain low. Amherst noted a near 0% cure rate of all loans in foreclosure, 0.8% for 90 plus days delinquent, 4.4% for 60 days delinquent and 26.5% for 30-day delinquencies. All told, Amherst expects 12.42% of units (from the 13.54% of properties delinquent and in foreclosure) to eventually liquidate.
Despite efforts by servicers and the Administration to prevent delinquent loans from foreclosing, the federally-funded HAMP modifications will likely disappoint in the long-term, Amherst said. HAMP, which allocates capped incentive amounts to servicers that pursue loan modifications, includes a three-month trial period to ensure borrowers can meet payments on the modified loan.
But it may take much longer than three months to determine the ultimate performance of HAMP modifications, Amherst said, noting the historic 12-month recidivism — or re-default — rate on modified loans sits at about 70%.
“We have argued that HAMP modifications are unlikely to be successful in the long run as it does not address negative equity, the single most important determinant of default,” analysts wrote. “And the borrower will still face payment shock as the payments begins to ramp up after the 5-year period in which the payments are fixed.”
Even should HAMP outperform historic modifications, Amherst does not expect much of the overhanging inventory to cure. Assuming an 85% qualification rate for the 7m units seen in the overhang, analysts pointed out a 50% borrower outreach success rate — meaning servicers will statistically contact only 50% of the qualifying borrowers. Of these borrowers eventually reached, analysts said only 50% will submit the necessary documentation and only 75% of those modifications will succeed.
“[I]t suggests that 16% of the overhang or just over 1m units would be eliminated,” analysts wrote. “And many of these borrowers would default later, if they remain in a negative equity position.” By Diana Golobay.
California Joblessness Reaches 70-Year High
California’s unemployment rate in August hit its highest point in nearly 70 years, starkly underscoring how the nation’s incipient economic recovery continues to elude millions of Americans looking for work.
While job losses continue to fall, the state’s new unemployment rate — 12.2 percent, according to the Bureau of Labor Statistics — is far above the national average of 9.7 percent and places California, the nation’s most-populous state, fourth behind Michigan, Nevada and Rhode Island. Statistics kept by the state show California’s unemployment rate was 14.7 percent in 1940, said Kevin Callori, a spokesman for the California Employment Development Department.
While California has convulsed under the same blows as the rest of the country over the last two years, its exposure to both the foreclosure crisis and the slowdown in construction — an industry that has fueled growth in much of the state over the last decade — has been outsized.
“We were at the epicenter of the housing bubble, and we are at the epicenter of the fallout,” said Stephen Levy, senior economist and director of the center. “The reason we are doing worse in California than other states is construction.”
U.S. leading economic indicators rise for fifth straight month
The U.S. recession is bottoming out and a recovery is near, economists for the Conference Board said Monday after reporting that the index of leading economic indicators rose 0.6% in August, the fifth straight increase. The coincident index – designed to measure current activity – was flat in August after an upwardly revised 0.1% gain in July, the private research organization said. “These numbers are consistent with the view that, after a very severe downturn, a recovery is very near,” said Ken Goldstein, economist for the organization. The 0.6% increase in August was weaker than the 0.7% increase expected by economists surveyed by MarketWatch
By Rex Nutting
California foreclosure filings drop
Foreclosure filings dropped both month-over-month and year-over-year in California in August, while the inventory of properties scheduled for the foreclosure auction block continued to grow, according to a report Tuesday from ForeclosureRadar Inc., a Discovery Bay-based company that says it tracks every California foreclosure.
Central Valley counties account for five of the state’s top ten counties for foreclosure sales per capita.
Key findings from ForeclosureRadar’s August report:
• Notices of Default filings, the first step in the foreclosure process, dropped substantially from July to 36,396 filings, a 19.1 percent decrease. Year-over-year filings dropped by 14.2 percent from August 2008.
• Notice of Trustee Sale filings continued to swing wildly, dropping 15.1 percent from July to 33,362, after having jumped 31.6 percent from June to July. Year-over-year filings dropped by 8.1 percent from August 2008.
• Foreclosures scheduled for trustee sale increased to 131,300, a 5.1 percent increase from July, and an 89.1 percent year-over-year increase from August 2008.
• Foreclosures sold at auction increased 3.4 percent to 17,829 sales, with a combined loan value of $8.31 billion. Year-over-year trustee sales remain 32.2 percent lower than August 2008. Just 13.4 percent of scheduled foreclosure sales were sold at auction in August, while 37.9 percent of scheduled foreclosure sales were sold in August 2008.
The majority of sales are being postponed to a future date at either the lenders request or with their agreement.
U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month
Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.
A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier, and down 0.5 percent from July, the Irvine, California-based company said in a statement. One in 357 households received a filing.
“The foreclosure numbers are largely unemployment related,” Davis, a former Federal Reserve Board economist, said in an interview. “As long as 15 million Americans are unemployed, record foreclosures will continue.”
Home Prices Could Fall by Another 25% – CNBC
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
“If you look at the drivers for unemployment I don’t see that reversing very soon,” Whitney said.
“Banks are taking advantage of what the government is doing by artificially inflating asset prices so they can ride a steep yield curve and they’re going to have a third quarter that reflects that,” Whitney said.
Their shares are unlikely to be uplifted by these results as it happened in mid-July, because then they were under-valued, she added.
Property taxes may drop statewide
Property taxes may drop statewide
• Recession turning into deflation
• Could be first statewide lowering of tax rates in 30 years
Property taxes statewide may drop for most homeowners if the inflation factor continues to be negative, says Bill Leonard, a member of the California Board of Equalization, the state’s tax collector.
This determination was decided in a Board of Equalization staff opinion released Wednesday.
The California Department of Industrial Relations calculates the California Consumer Price Index using price data published by the U.S. Bureau of Labor Statistics. If negative inflation — also known as deflation — occurs over the 12-month period ending in October 2009, then all Proposition 13 base year values must be adjusted downward to reflect the deflation, according to the opinion.
California economy sees uptick in July
California economy sees uptick in July
• Fourth monthly increase seen by Comerica
• “The California economy has begun to rebound”
California’s economy rebounded in July compared to June, according to a report Wednesday from Comerica Bank.
Its “California Economic Activity Index” shows a three point rise in July, to a level of 99. July’s reading is up eight points cumulatively from its March low of 91, marking the fourth consecutive monthly increase, the bank says.
“The California economy has begun to rebound over the last several months with six of the nine components of our Index contributing positively,” says Dana Johnson, chief economist at Comerica Bank. “Sales tax revenues, which so far have been the biggest contributor to the rebound in our index, may flatten out in upcoming months, thereby reversing some of the recent strength. I will become much more confident that a sustainable recovery is underway once I begin to see employment gains also contributing to the rise of our index.”
