Observer left this comment this morning:
I CAN TELL BY THE NATURAL EVOLUTION OF THIS BLOG FROM REAL ESTATE CHAOS AND DROPPING PRICES TO FLOORING SAMPLES THAT STRONGLY SUGGEST THAT THIS REAL ESTATE MESS IS WINDING DOWN.
THE BLOG USED TO FOCUS ON REAL PROBLEMS AND THE MESS OUT THERE BUT NOW IT HAS SHIFTED TO MUNDANE NEWS. TO ME THIS HINTS THAT THE END OF THE BUBBLE IS OVER.
JUST MY CASUAL OBSERVATION.
It might have been the all-caps that got me, but let’s address his observation. Transparency is a good thing, and if all observers were weighing the most critical factors every time they made a decision, we’d all be better off for it.
Is the Housing Bubble over?
The inflating of the housing bubble appears over. Not only do buyers have to qualify, they must have skin in the game. And they’re bringing the dough – of the 2,448 detached sales in NSDCC last year, 525 were all-cash purchases, or 21.4% of the total. We saw all year that another 30% to 40% more of the homebuyers were using at least a 30% down payment:
If we figure that at least half of the buyers are in for the long-haul, it’ll help bring stability to the marketplace by not adding many new defaulters to the environment. But we still have over-hang, the rest of the underwater/underemployed folks to work through the system.
Could the rest of the clean-up cause more double-dip?
Everyone has to decide for themselves about how they think the future will unfold/unravel. We’ll review here every piece of relevant news, and encourage those reading to offer their opinions – that way, we all learn. It’s been working great so far, let’s keep examining!
Here’s something that could play a role in how it turns out:
This from Diana Olick at cnbc.com:
A recent report from the folks who oversee the TARP (the Congressional Oversight Panel) said that the Treasury has spent just $4.3 million on HAFA for 661 short sales. So Treasury, last week, decided to change the rules a bit:
- HAFA no longer requires that servicers verify the borrowers finances
- HAFA no longer requires servicers to determine if the borrowers monthly payment is higher than a 31 percent debt-to-income ratio.
- HAFA no longer requires second-lien holders to agree to accept 6 percent of the unpaid principal balance owed them, up to $6,000. Servicers now decide who gets paid how much, with a cap still at $6000.
- HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.
The last one is a no-brainer, as delays have scuttled far too many deals that could have benefited both borrowers and lenders.
I’m less thrilled with the verification of borrowers’ finances and DTI ratio. If you don’t have to verify anything about the borrower, other than a so-called, “hardship affidavit,” then that opens the program up to all kinds of scams by borrowers who don’t need to sell their home but just want to get out from under a bad investment. They may be delinquent on their loans by choice, not by necessity.
I’m sure the folks who had no problem lying on their mortgage applications would also have no problem fabricating some kind of “hardship.”
As for the second lien issue, that’s just a big bad can o’ worms that needs far stricter guidance, not more lenient guidance.
Second lien-holders, many of whom are the major banks/servicers themselves, have been the fundamental roadblock to short sales so far.
Here they go again, letting borrowers off the hook. If the sellers don’t have to provide their financials, it could help the short-sale market – some of the biggest delays are from the sellers not supplying their paperwork, or being over-qualified to short-sell. But if it’s easier to get a short sale, could it cause a run of additional takers? Probably, and it would clog deadbeat-alley even further.
Diana is right though, the second-lien issues are a big hurdle – if you think that short-sales will be a pivot point to how the bubble deflates, keep an eye on how the second-lien issues get resolved. My opinion? Short sales are still long and arduous, there’s no improvement yet in getting them closed – and likely to stay that way. Short sales are a great can-kicking device for servicers.
“•HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.
The last one is a no-brainer, as delays have scuttled far too many deals that could have benefited both borrowers and lenders.”
This may sound good, but in practice I don’t think it will ever work.
Agent (after waiting 30 days for an answer dor 30 days: “so Mr. servicer, do we have approval?”
Servicer: “we need more time”
Agent: “But under HAFA, you need to tell us today!”
Servicer: “Then the answer is no.”
For those who have concerns that the MERS mortgage-securization problem might cause borrowers to get a free house, creating a whole new level of uncertainty……
Here is the appeal case in Massachusettes:
Jason Menke, a spokesman for San Francisco-based Wells Fargo, the fourth-largest U.S. lender by assets, said American Home Mortgage filed the appeal brief on the trusts’ behalf.
The banks, acting as trustees on behalf of the owners of debt issued based on bundled home loans, argued in their brief that borrowers can’t challenge their compliance with securitization agreements because they aren’t parties to them.
Settlements have to be in the works, don’t they?
http://www.bloomberg.com/news/2011-01-06/foreclosures-may-be-undone-by-massachusetts-ruling-on-mortgage-transfers.html
(HT Jeff!)
Totally Off Topic-But I’m wondering if there are any service providers out there that helps an individual buyer of a home, not investment properties or flips, that can aid a person in buying a property on the court house steps. Been hunting for a while now, and I’m looking at all alternatives. Our rent back expires around May-June so time is running out for us. Any suggestions from this crowd who’s typically quite knowledgeable?
Deb,
Don’t you have a realtor? I’m pretty sure you do.
Can you ask him/her?
This isn’t a blog for sharing real estate service-providers, because I am one. I’d want to be the person who provides real estate service for everyone here.
If I’m wrong, and you don’t have a realtor, then I can help you determine the best buys, and get you in a position to purchase at the trustee sales. You’ll need cashier’s checks for the entire purchase price (or hard-money financing arranged in advance), and figure that you’ll pay close to retail price with no title insurance or inspections. The flippers have been buying around 10% under value, which is way too thin if you ask me.
You’ll still have to endure multiple postponements and never really know if the sale is happening, or what the opening bid will be, until the day of the sale.
Not your standard buyer-friendly environment.
To counter OBSERVER (and using regular case text) I don’t think the mission of Jim’s blog has changed at all. I think Jim is being very, very smart by focusing on realistic costs for improvements.
As Jim has noted over and over again, there is a whole lot of very dated inventory out there that needs buyers with a bit of vision and willingness to spend a few bucks to remove the 70’s and bring in today. If the house has terrible floors, these flooring vids are going to have a bunch of buyers thinking “hey, it actually wouldn’t cost so much to replace the floors and now we know where to shop.”
Buying a house that needs a little bit of work is scary for a lot of people (I’m the opposite, I’d rather do the renovations myself so I get exactly what I want…) So, getting some pricing together will help move some lingering inventory that lacks modernization.
That is Jim’s job – help remove the barriers to getting a buyer into a house that they will be happy with. That sometimes is going to include showing them where to spend and how easy it can be to turn a sow’s ear into a warm and comfortable home.
Sorry about that Jim, yes, I do have a realtor but she doesn’t assist in the type of purchase I mentioned.
FWIW I dig the home improvement stuff, even though I still rent. The reason we’re seeing more of it is likely a product of the atrophy of the current housing market; it’s more interesting than hearing the same news everyday when nothing is changing.
In general the government and large banks are doing everything to buy time and give the impression that everything is ok. The economy is driven by confidence and because people’s memories are short postponing a problem can help instill confidence. I think somewhere down the road we’ll have another crisis but it will be when mot people are confident we won’t. A watched pot never boils.
It really all comes down to math in the end and the math says we have way too much debt in the system. When the debt problem gets resolved and not just papered over we’ll be back on our way to prosperity. The debt problem can only be resolved through default and liquidation or devaluation but neither of those things comes without some significant pain. We are trying to solve the problem but without dealing with the pain of losses associated with it. It basically can’t be done but we’re trying.
Boy, so unusual these days to receive a telegram like that. 😉
@Kingside
Boy you really understand how a beaurocracy works dont you!
HAFA no longer requires that servicers verify the borrowers finances
Could this also be along the lines of allowing a person who could not afford the property in the first place, to be able to use HAFA to further draw out the process – No-Docs#2? (particularly combined with HAFA no longer requires servicers to determine if the borrowers monthly payment is higher than a 31 percent debt-to-income ratio..
Hasn’t anyone in the current and previous admin learned anything from what we’ve been through already?
I’m with Art. It will be hard to find a house that is exactly what you want, and to get a less than market price on it. If you want a “cheaper” house, it will have to be a stale listing because of an undesirable look. If the bones are bad, stay away, but if they are good, and it just needs cosmetic changes, then go for that. You’ll get a good price, gain some sweat equity, and have a house exactly the way you want it.
@livinincali
The only certainty that we have besides you’ll have to pay taxes and the sun will come up tomorrow is that there will be a crisis before the next election.