Treasury Backs Principal Reduction

Thank you taxpayers!  From HW:

The Treasury Department will triple payments to mortgage investors for reducing borrower principal through an expanded Home Affordable Modification Program announced Friday.

Officials announced several critical changes to HAMP, including an enrollment extension to Dec. 31, 2013, from its original expiration date at the end of this year.

The Treasury will also require servicers to factor in second liens and other obligations in the debt-to-income ratio calculation. Previously, if a borrower’s first-lien mortgage monthly payment was below 31% of the income, the borrower was deemed ineligible. Factoring other debts to the DTI evaluation will expand the pool of borrowers who could receive the assistance.

To combat blight, officials said they would also expand HAMP to investors who are renting properties to tenants.

Since HAMP launched in March 2010, more than 900,000 permanent modifications have been conducted. The Treasury originally estimated the program to reach between 3 million to 4 million borrowers. As of Dec. 1, less than 1 million were estimated to be eligible for the program under past rules.

Of the modifications already given, roughly 36,400 resulted in reduced principal as of Dec. 1. The Treasury paid between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will grow to between 18 and 63 cents, under the rule changes.

In a conference call Friday, Treasury Assistant Secretary Tim Massad would not estimate how many borrowers would be eligible after the changes, but he did say mortgage servicers were signaled some expansion, even for principal reduction.

“We have previewed the changes with the servicers,” Massad said. “We got a very positive initial reaction.”

Department of Housing and Urban Development Secretary Shaun Donovan said in the conference call Friday that the Treasury would make these payments to Fannie Mae and Freddie Mac if they participate in the principal reduction program.  To date, the GSEs have not committed to such a program.

Both GSEs owe the Treasury $151 billion in bailouts, and their regulator the Federal Housing Finance Agency said a wide-scale principal reduction program would cost Fannie and Freddie $100 billion.

Of the $29.9 billion allocated for HAMP and other housing programs, the Treasury has spent only $2.3 billion. The Treasury still owes another $9 billion to $10 billion for the modifications already done, Massad said.

Donovan renewed calls for servicers to ramp up principal reductions, and reiterated that they would be a main tool in crackdowns stemming from the ongoing foreclosure settlement talks and the securitization investigations launched this week.

“These changes aren’t going to solve all the problems in the housing market, but they shouldn’t have to wait for the market to hit bottom before getting some relief,” Donovan said.

Potential for Squishdown

Where are the most stubborn sellers, price-wise?

NSDCC active detached listings by price range:

Actives 0-$700K $701-$1.2 $1,200,000+
# of listings
LP Avg $/sf
Avg. DOM

Last year there were 646 closings over $1,200,000, at an average of $541/sf, which sounds miraculous in and of itself.

But there are more listings priced OVER $1,200,000, then there are under!

Can the upper-enders hold out long enough? Will they adjust their price, and if so, when?

Third-Party Advertising

This long-time local broker is fed up with the 3rd-party real estate websites using our listings to make money.  It must be big money too, because there are now over 900 websites that advertise properties.

These websites (Zillow, Trulia,, etc.) are selling the advertising space surrounding each listing to other agents, making them look like the listing agent.

But does anyone frequent them?  Maybe Zillow or

This doesn’t affect Redfin or Zip, they are brokers who actually sell real estate.  He is willing to cooperate in our IDX system which allows each agent to distribute the properties on the MLS.

But it’s another sign of how chippy it is getting – our low-inventory environment is ripe for changes on how real estate is sold:

Mortgage-Fraud Plea Bargain

From Kelly Bennett at the

This time three years ago, we were working on an investigation into why more than 80 condos in North San Diego County fit an odd pattern of extravagantly high purchase prices and near-immediate foreclosure.

Today, the man at the center of what Will Carless and I uncovered in our “A Staggering Swindle” investigation pleaded guilty to federal charges of money laundering and conspiracy to commit fraud.

Jim McConville went up and down the state for a few years last decade, convincing dozens of people to rent him their identities. He used their credit scores to dupe banks into granting mortgages to those individuals, often buying a handful of condos (whose prices had been artificially inflated) at once in one person’s name. The purchase prices we found in North County at apartment-turned-condo complexes in Escondido and San Marcos were way higher than what the market should’ve warranted in the middle of 2008.

McConville then kept the difference between what he’d agreed to buy the condo for and the loan the bank approved. His company captured more than $120,000 out of each of the transactions he did here. In just three complexes in San Diego County, McConville pulled out more than $12.5 million, according to developer records we analyzed.

Because now-government-controlled mortgage banks Freddie Mac and Fannie Mae bought the loans after lenders made them, taxpayers are on the hook for a big chunk of the losses accrued when the condos went into foreclosure.

Several other defendants have already pleaded guilty to lesser charges. McConville is scheduled to be sentenced on April 18 in the Bay Area.

If you’re just catching up on the story, here’s a link to our initial investigation and the pieces we’ve reported since then.

Stale-Listing Tips

From Trulia:

In today’s market, most listings aren’t instantly flying off the market. While we all know price is one of the most important factors in the sale of a home, there are other factors they can improve the saleability of your listings.  Here are a few tips to get that stale listing sold (besides the most important – lower the price!):

(1) Offer incentives or alternative financing options

Incentives can make a big difference for buyers who are stretching to find the down payment to buy a home or who may be sitting on the edge of loan limits. Seller incentives such as paying for closing costs, inspections, or repairs, or providing allowances or credits for home upgrades after closing can make a big difference to home buyers short on cash.

Other alternatives could include pre paying taxes, homeowners dues and insurance. Consider offering buyer incentives to encourage on the fence buyers to take action on your listing.

(2) Make it accessible

Take a hard look at the accessibility of a home. Today’s home buyer is impatient. They want to see homes and they want to see them now. Make sure your listings are simple and easy to show. Carl Medford, an agent with Prudential California Realty in the San Francisco Bay Area believes home accessibility is the #1 reason homes don’t sell. “If we can’t get in, we can’t show the house. If we can’t show the house, we can’t sell it. We frequently end up showing less than six homes because we can’t get access to homes on the list.”

(3) Expose it- everywhere!

We are often surprised by the number of homes with property addresses undisclosed on the internet. It’s no secret homebuyers are looking on the internet for homes, make sure they can easily find it. Two popular search filters we see prospective homebuyers using on are filters for listings with open houses and filters for listings with price reductions.  Want more eyeballs on your listings? Make sure they are updated weekly on popular real estate search sites like Trulia and Craigslist and be sure to list your open home times to get the max exposure for your listings. 

(4) Refresh your photos

Today’s homebuyer spends a lot of time online. As your listing becomes stale, so do the property photos. Consider retaking the photos, especially if seasons have changed. If taking new photos is out of the question, you may want ot consider changing up the order your photos display online to give it a fresh appearance for web browsing buyers. Many agents start their photos with a picture of the front of the house when they would be better served displaying the huge backyard or the amazing chef’s kitchen.

(5) Put some zing in your marketing copy

In addition to stale photos, your marketing copy may be putting prospective buyers to sleep. “Check out my 3 bedroom, 2 bath home in a great location.”  Yawn. Add some zing to your headlines and descriptions to draw the attention of homebuyers. Your marketing copy needs to tell a story that appeals to the people most likely to buy your listing. Your copy can get old too. Simply freshening it up frequently is a good way to capture more attention to your listings.

Jim the Realtor Podcasts

There is a new button in the right-hand column – PODCASTS >>>>>>>>>>

The purpose:

  • To offer a proactive way for clients to stay informed/involved with the market.
  • To provide data in a different format that could be more attractive to some.
  • To give people another reason to hire me to be their realtor.
  • To tell stories!

By clicking on the PODCASTS button, you can listen to JtR audio reports, and if interested, subscribe to receive them automatically.  The intent is to generate new clients, and direct them to the private website for more in-depth assistance.

Lynn B. gave me the podcast idea, and has been very encouraging – thank you Lynn!

Here is a video that corresponds with the first podcast – it might take me a few to get rolling:

Obama To Squeeze Buyers

CR outlined on his show how the Fannie/Freddie HAPR refinances will escalate in March when they change to automated underwriting, and loosen the guidelines by not requiring appraisals or income verifications.  See more details here:

In the State of the Union address last night, President Obama said he will send to Congress a proposal to expand the refinancing to loans carried by private lenders.  An excerpt from the

The new plan would require Congressional approval, a difficult hurdle for any legislation in the current polarized environment. Still, some Republicans have expressed support for expanding the availability of refinancing, and White House officials insisted that the plan was not an act of theater.

“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates,” Mr. Obama said Tuesday night in his State of the Union address. “No more red tape.  No more runaround from the banks.”

Administration officials said they would release the full proposal in the near future.

The new program will be directed at people whose mortgage debts exceed the value of their homes, according to a senior administration official who spoke on the condition of anonymity because the details have not yet been finalized. The official estimated that the program could benefit two million to three million homeowners who have loans that are not guaranteed by the government, and that the program’s cost would not exceed $10 billion.

The proposal is the latest in a long series of largely unsuccessful efforts by the administration to bolster the housing market. Like most of its predecessors, the plan is focused not on borrowers facing foreclosure but on those who have been able to keep making the payments on their homes. Reducing housing payments for those borrowers will allow them to spend more money on other things. It also could help to stabilize housing prices by encouraging them to stay in their homes.

They haven’t rolled out the details yet, let along convince Congress that they should add 2-3 million more refinances of private loans to the 1 million projected to be helped by HARP.

But if they did, the last sentence is the key – it will bring fewer homes to market, which may or may not ‘stabilize housing prices’. 

What his program will do is stagnate the market further, because there will be fewer distressed sales selling for retail price or less (which would stimulate sales!).  Instead, the housing inventory will be dominated by equity sellers who insist on listing their homes for retail-plus prices, and holding out. 

This additional program will force buyers to contend with lowly-motivated sellers – the ones who will sell, if they get their price.  Will buyers be willing to pay more?

Portal 2

The videos have purpose – I’ll keep showing ones like the previous video that document the frenzy – but others like this one to demonstrate home-improvement ideas.  This house is in the flight path for Lindbergh Field, and has been retrofitted to reduce noise:

Loan Underwriting Is Normal!

Click here: Realtor survey  – scroll down to page 14 for comments from agents about the market.

Here are the garphs from page 10 – the realtors surveyed say that most homes sold have languished on the market for more than three months – which shows how bad realtors are with pricing correctly:

An excerpt from Yun – he is trying to bully the mortgage industry into making riskier loans:

Consider the following loan performance after one year from the time of origination on Fannie Mae and Freddie Mac backed mortgages.

Loan default rates were 0.3 to 0.4 percent in the more “normal” housing years of 2002 and 2003 – before the housing boom, before all those exotic mortgage products (subprime, no-doc loans) and well before the developments of any housing bubble. In the immediate years after the bubble burst – 2007 and 2008 – default rates rose to 2 and 3 percent.

Now examine the performance for those loans originated in 2009 and 2010.

The default rates came in at 0.1 and 0.2 percent after one year of seasoning. Those are exceptionally low figures – in fact, even lower than those for the normal housing years. The data for 2011 is not yet available, but several indications point towards possibly an even better loan performance than we saw in 2009 and 2010. While the headline mortgage default data are driven by the souring loans from the bubble years, the default rates among recent borrowers have been at historic lows.

Banks and the regulators need to understand this important distinction and permit more loans to flow into the market.

My estimation based on credit scores of those who are being approved for mortgages today vs. those who were approved 10 years ago suggests that home sales could easily rise by 15 to 20 percent if the underwriting standards were to go back to normal.

That would be a sizable gain in home sales and would result in a commensurate decline in inventory. A decline in inventory and increased sales would help bolster home price appreciation. If underwriting standards return to normal, the housing market will approach a more normal state as well.

A normal housing market would help fuel a continuing economic recovery, help bolster household wealth, spur consumer spending, spawn more job creation (thus providing more fuel to the economy). It would, in effect, be a win-win situation. This is what we aim for. This is what we hope for. This is what NAR continues to work towards for its members and America’s homeowners.

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