Are government programs finally starting to solve the housing crisis? FromHW:
The number of refinanced Fannie Mae and Freddie Mac mortgages nearly doubled in the first quarter as the largest banks launched the expanded Home Affordable Refinance Program.
Servicers refinanced roughly 180,000 GSE loans in the first three months of 2012, nearly double the 93,000 completed in the fourth quarter, according to Federal Housing Finance Agency data. In March alone, servicers refinanced 80,000 borrowers under the program.
HARP launched in April 2009 to allow more borrowers who owe more on their mortgage than their home is worth to refinance. But few severely underwater borrowers could take advantage of historically low rates. The FHFA expanded the program last fall to remove the loan-to-value ceiling of 125% — the so-called HARP 2.0 — and to reduce upfront fees and eliminate repurchase risk if the original servicer on the loan completes the workout.
With the surge in the first quarter, total HARP refinancing now totals more than 1.2 million loans.
And more severely underwater borrowers are finally being included. More than 4,400 borrowers with LTVs above 125% refinanced through HARP in the first quarter. More than half of them were located in California, Florida and Arizona, states hardest hit by the foreclosure crisis.
Borrowers in the 105% to 125% range were often shut out as well, but that changed under the expanded program as well. In the first quarter, nearly 37,000 of these underwater borrowers refinanced, nearly triple the 13,000 in the previous quarter.
Lawmakers are considering another expansion of the program. Most of the HARP business is going to the largest banks because of the reduced repurchase risk, which is generating higher profits for these firms. Smaller lenders want in on the action and are busy lobbying Congress for more competition, specifically asking to remove repurchase risk for all lenders.
We might still be having some newcomers joining us as a result of the Realtor Magazine article, which was posted on the NAR website last week. The actual magazine just arrived at my house yesterday by mail.
Welcome agents!
Let’s discuss the publishing of each agent’s sales statistics, and the insane paranoia surrounding it.
Redfin had their agent-scouting tool for about a week, but couldn’t shut it down fast enough once the whiners got a hold of it.
Now www.neighborcity.com is trying to make a living by generating leads that they can sell to local agents for a 30% share of the eventual commission. They have the typical home-search website, but they also include each agent’s sales over the last 12 months. Theirs is a statistical analysis, not opinions like you see on Yelp, so it looks straight-forward and objective.
But, of course, they are now being sued for copyright infringement by a local MLS company, with N.A.R.’s financial support. NeighborCity is fighting back:
Realtors as a group, led by the N.A.R., will always come out looking like big-monied bullies who are just scared to give up the old monopoly. By now the monopoly is an illusion anyway, let’s admit it and move into this century!
The N.A.R. should publish each agent’s sales statistics, and a feedback forum.
Such a package would help verify accuracy, give a reason for more people to use realtor.com, and hopefully generate some respect from consumers for providing transparency to the process.
Most importantly, it would help achieve two things:
1. Allow consumers to better judge who they are hiring.
2. Cause agents to focus on delivering top-quality, ethical service.
Instead of the glamour shots, fancy cars, and plastic surgery, the publishing of sales statistics and feedback from previous clients would force agents to deal with the truth.
The gig: Ed Kushins, 65, is the founder and president of HomeExchange.com, based in Hermosa Beach. It is one of the nation’s largest members-only home exchange businesses.
What is a home exchange? With 43,000 members, HomeExchange helps participants reach agreements to swap their homes for vacations or business trips. The deal provides each with a house or apartment, and it eliminates the need to pay for hotel rooms. Members pay about $120 per year for access to the company’s member database.
How does it work? A member in Southern California looking to visit Florida, for example, finds homes of Florida members and exchanges photos and emails, asking if any of the Florida homes are available on the desired dates. If two parties agree, they arrange the trade. HomeExchange facilitates the meeting but does not perform background checks or referee the transaction.
Executives last year began to ask themselves “isn’t there a way to sort of combine that whole process and keep the borrower in the property? It’s just better for the market,” said Ron Sturzenegger, the Bank of America executive who last summer was put in charge of the unit that handles troubled mortgages.
The initial pilot is limited to loans that Bank of America holds on its books. Homeowners can’t apply for the program—only those who receive letters from the bank can participate.
Borrowers would agree to a what is known as a “deed-in-lieu” of foreclosure, where they essentially sign over ownership of the property to the lender. This is less costly to the bank and also does less damage to a borrower’s credit than a foreclosure.
Borrowers selected for the program must be at least two months past due on their mortgage and face considerable risk of foreclosure. Bank of America is reaching out to borrowers who have exhausted other alternatives to foreclosure or who haven’t responded to earlier solicitations. Homeowners with second mortgages or other liens won’t be selected.
“Pilot participants will transfer title to their properties to the bank and have their outstanding mortgage debt forgiven. In exchange, they may lease their home for up to three years at or below the current market rental rate,” according to a statement. The rent will be less than the mortgage payment and the (former) homeowner will have no financial obligations to the property, like taxes and insurance.
Bank of America will work through property management companies to handle the pilot. A Bank of America spokesman tells CNBC, “We’ll own the properties only in the pilot and only initially. If a decision is made to roll out a full program, Bank of America would not be in the ownership position at all.”
Thanks to the many readers who sent in articles and video about realtors using drones to photograph houses – this is the first that I was able to copy:
Hopefully we might see one of these around here before long!
Four years after the housing bust, researchers at the Federal Reserve Bank of New York are putting some of the blame on real estate speculators, saying they played a key role in blowing up the housing bubble that eventually popped, causing home prices to tumble nationwide.
In a report titled “Flip This House: Investor Speculation and the Housing Bubble,” four researchers claim borrowers who owned multiple homes for investment purposes played a key role in running up national home values right before the 2007 housing meltdown.
In fact, the report found a third of U.S. home purchase lending in 2006 was issued to borrowers who already owned property. In California, Florida, Arizona and Nevada, investors made up 45% of the 2006 transactions, suggesting the deep pain in these markets was rooted in excessive levels of real estate speculation.
“In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20% of originations, almost triple their share in 2000,” the study said.
The report describes these investors as over-leveraged borrowers, consuming large doses of non-prime debt with high interest rates and low-down payments to fuel their appetites for quick acquisitions that could be flipped for profit.
What these investors created was an insidious cycle, where their excessive buys pushed prices higher for all buyers. When the bust came, these overleveraged house flippers escaped by abandoning their second liens, while innocent homeowners ended up underwater on their mortgages.
The report – which was filed by Andrew Haughwout, Donghoon Lee, Joseph Tracy and Wilbert van der Klaauw with the New York Fed Bank – puts the blame mostly on speculators operating in the 2004-to-2006 time span.
The authors of the report claim many of the investors may have falsely stated an intention to live in the homes while applying for cheap credit.
Either way, the report’s authors see a need for housing policy to address the issue of excessive leverage and speculation to curtail similar trends in the future.
“In the 2000s, securitized nonprime credit emerged to allow leverage to increase, with effects that extended far beyond this sector, including spillovers from defaulted mortgages to the value of other properties. Effective regulation of speculative borrowing, like what is being attempted in China today, may be needed to prevent this kind of crisis from recurring,” the report concluded.
Now that the barn door has been left open for several years, our local MLS provider, Sandicor, has finally developed a website that will allow the consumer to access the MLS directly:
They don’t ask us for ideas about what it wanted and needed, they just roll this out and hope it works. They say they’d like feedback, but they probably think that people will be gushing with praise.
San Diego’s four Association of REALTORS® and Sandicor are excited to announce the release of a new consumer website! This website is designed to turn the consumer’s focus back to Brokers and Agents and away from third party sites such as Zillow and Trulia that rank among the top 20 websites in the category of San Diego real estate. In addition to the Sandicor MLS site, there will be four additional websites branded to each of the four Shareholder REALTOR® Associations that own Sandicor. The goal is simply to reverse the trend of consumers going out to and staying on third party sites and to drive consumer traffic back to our member’s websites.
Developed around a powerful and flexible search engine, the websites provide the following benefits for brokers and agents:
–Deliver leads to brokers and agents
–Drive traffic back to brokers and agents and away from third party sites like Trulia and Zillow
–Facilitate a consumer’s search for San Diego County real estate information and properties.
–Provide consumers with unbiased, timely (updated every 10 minutes) and comprehensive data – all of which are valued and preferred by the consumer
–Allow the consumer to find an agent using a name, affiliated office or location
–Permit county-wide Open House searches
–Provide valuable Community Data
–Provide links to helpful information such as Population Statistics, School Systems, and Government Resources
–Offers a variety of reports for both Brokers and Agents on their listings such as the number of views of their listings in a search, the number of times the listing was displayed and emailed and more.
–Lead to a reduction in the fees paid by Brokers for participation in national third party sites.
There is no additional fee to provide this tremendous benefit. Sandicor can leverage the consumer view that the MLS is the trusted source for real estate information provided by and for the real estate professionals in San Diego County. The consumer knows MLS data is unbiased, timely and comprehensive.
Please watch for future emails informing you of what reports will be available to you and how to update your contact information. We look forward to making the sites a success and to help bring the business back to you! Go ahead, click on the link and take a test drive now!
A month ago, the president of NAR asked for ideas on solving the housing crisis here. The national convention starts this weekend in Anaheim, and hopefully during the session, he’ll be reviewing thoughts from realtors around the country.
He can start solving the housing problems by changing what it is under his control. My ideas:
As president, don’t just be a figurehead, get something done. Have a real agenda of items that will forward the realtor community, and push to have them implemented. And don’t do what Dick Gaylord did. He was NAR President, accomplished nothing, and now he is bugging realtors to use his lender services. You shouldn’t get to use the office of NAR president as a soliciting tool.
Make our website, realtor.com, the best real estate portal. According to my clients, Redfin’s website is much better. Stop allowing move.com to run a lousy website on our behalf, and then let them pillage us for ridiculously high fees to advertise our own listings.
Develop a specific set of procedures on how every realtor will handle short sales. There is rampant short-sale fraud being inflicted by realtors, because nobody is doing anything to stop it. Realtors won’t play by the rules if there aren’t any.
Be an advocate of foreclosure. You are on the wrong side of this issue. The majority of Americans pay their bills, and are tired of the deadbeats being coddled. Promote foreclosure as the way to solve the housing crisis, because it is.
Support agent scorecards/feedback sites. Realtor.com should promote agent rankings and client feedback systems. Use a system like the one used at ebay, where clients can leave public comments on performance, and agents can rebut those that are negative. Realtor.com should also list how many sales each agent has closed in the last 12 months as an indicator of their proficiency – and no team counts.
Promote open house as a sales tool. Buyers want convenience. Promote broker preview day as a public event, and educate agents on effective open house techniques. And counter the argument that the only thing open houses are good for is to generate leads. Open houses will sell the house – if they have the right price on them.
Ditch the value-range marketing. It sends the wrong message (we don’t know what it’s worth so you figure it out), and is a gimmick that furthers our slimy reputation.
Promote real estate classes as general education in schools.
Teach real estate principals to agents. A broad category, so I’ll give just one example. Recently I had a prominent listing agent tell me when I questioned her price, “The average market time is 115 days in this area, and we’ve only been on the market two months”. But you don’t wake up on that 115th day and find the purchase offer on your fax machine. Teach agents that your best chance of getting top dollar is in the more-urgent first 30 days, and to price accordingly – instead of pricing high and getting stale quickly, resulting in chasing the market down.
Teach real estate salesmanship to agents. When the MLS was founded in the 1960’s, the intent was broker cooperation – that agents work together to help buyers and sellers. These days agents think their job is to fight the other agent.
Enforce the rules and ethics. You don’t have the power to revoke their license, but you can kick them out of the club. If agents saw a few bad apples lose their MLS privileges, everyone would straighten up.
The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S.
The provision is part of a larger package of immigration measures, co-authored by Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah), designed to spur more foreign investment in the U.S.
Foreigners have accounted for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit markets. Chinese and Canadian buyers, among others, are taking advantage not only of big declines in U.S. home prices and reduced competition from Americans but also of favorable foreign exchange rates.
To fuel this demand, the proposed measure would offer visas to any foreigner making a cash investment of at least $500,000 on residential real-estate—a single-family house, condo or townhouse. Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out.
The measure would complement existing visa programs that allow foreigners to enter the U.S. if they invest in new businesses that create jobs. Backers believe the initiative would help soak up an excess supply of inventory when many would-be American home buyers are holding back because they’re concerned about their jobs or because they would have to take a big loss to sell their current house.
“This is a way to create more demand without costing the federal government a nickel,” Sen. Schumer said in an interview.
International buyers accounted for around $82 billion in U.S. residential real-estate sales for the year ending in March, up from $66 billion during the previous year period, according to data from the National Association of Realtors. Foreign buyers accounted for at least 5.5% of all home sales in Miami and 4.3% of Phoenix home sales during the month of July, according to MDA DataQuick.
Foreigners immigrating to the U.S. with the new visa wouldn’t be able to work here unless they obtained a regular work visa through the normal process. They’d be allowed to bring a spouse and any children under the age of 18 but they wouldn’t be able to stay in the country legally on the new visa once they sold their properties.
The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas. There would be no cap on the home-buyer visa program.
Over the past year, Canadians accounted for one quarter of foreign home buyers, and buyers from China, Mexico, Great Britain, and India accounted for another quarter, according to the National Association of Realtors. For buyers from some countries, restrictive immigration rules are “a deterrent to purchase here, for sure,” says Sally Daley, a real-estate agent in Vero Beach, Fla. She estimates that around one-third of her sales this year have gone to foreigners, an all-time high.
“Without them, we would be stagnant,” says Ms. Daley. “They’re hiring contractors, buying furniture, and they’re also helping the market correct by getting inventory whittled down.”
In March, Ms. Daley sold a four-bedroom vacation home in a gated community to Harry Morrison, a Canadian from Lakefield, Ontario. “House prices were going down, and you could still make a lot of money on the exchange rate,” said Mr. Morrison, who first bought a home in Vero Beach four years ago.
While a special visa would allow Canadian buyers like Mr. Morrison to spend more time in the U.S., he said he’s not sure “what other benefit a visa would give me.”
The idea has some high-profile supporters, including Warren Buffett, who this summer floated the idea of encouraging more “rich immigrants” to buy homes. “If you wanted to change your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you’d solve things very quickly,” Mr. Buffett said in an August interview with PBS’s Charlie Rose.
The measure could also help turn around buyer psychology, said mortgage-bond pioneer Lewis Ranieri. He said the program represented “triage” for a housing market that needs more fixes, even modest ones.
But other industry executives greeted the proposal with skepticism. Foreign buyers “don’t need an incentive” to buy homes, said Richard Smith, chief executive of Realogy Corp., which owns the Coldwell Banker and Century 21 real-estate brands. “We have a lot of Americans who are willing to buy. We just have to fix the economy.”
The measure may have a more targeted effect in exclusive markets like San Marino, Calif., that have become popular with foreigners. Easier immigration rules could be “tremendous” because of the difficulty many Chinese buyers have in obtaining visas, says Maggie Navarro, a local real-estate agent.
Ms. Navarro recently sold a home for $1.67 million, around 8% above the asking price, to a Chinese national who works in the mining industry. She says nearly every listing she’s put on the market in San Marino “has had at least one full price cash offer from a buyer from mainland China.”
