Blown Mortgage

More than half of homeowners have remodeling plans this year

Jay Hammond — Sat, 04 Jul 2009 02:50:00 +0000

It looks like it going to be a busy year for do-it-yourselfers. A new poll from Consumer Reports reveals that 54 percent of homeowners participating in the poll plan some type of remodeling project during the next 12 months. Sixty-five percent of them plan to do the work themselves.

Now, remodeling is not unknown among homeowners, even during boom times. The recent economic downturn, however, has forced 67 percent of homeowners to rethink their plans. The biggest changes to remodeling plans include:

Doing the work themselves – 42 percent
Fixing or sprucing up what they already have – 39 percent
Remodeling in phases – 36 percent

According to the Consumer Reports poll, the most popular types of work include painting (56 percent), designing (39 percent) and flooring (34 percent). The most popular remodeling projects are kitchens (19 percent) and bathrooms (17 percent).

“Whether homeowners are venturing into a project themselves or plan to hire a professional, you need to lay out a budget, decide what you want most at the end of the project — and decide what you can live without,” advises Bob Markovich, senior home editor at Consumer Reports. “The more homeowners know what they’re getting into, the more money they’ll save.”

Remodeling funds come from a variety of places. Most homeowners, 66 percent, support their projects with their savings. Others, 29 percent, plan to cut back on travel and entertainment while another 21 percent are using a home equity or other loan.

The biggest reason consumers are cutting back on remodeling is that they simply do not have the money, according to 42 percent of respondents. Many homeowners, right now, are focused on paying, modifying or refinancing their mortgage rather than remodeling. There are homebuyers out there, like http://www.times-gazette.com/news/article/4609738 Chad and Brittany Johnson in Ohio, who purchase a foreclosure home for far less than market price and immediately remodel it.

HUD Expands Making Home Affordable Eligibility

Jay Hammond — Thu, 02 Jul 2009 11:20:31 +0000

On July 1, 2009, U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced an expansion of the Making Home Affordable Refinance Program to include borrowers who are current but up to 125 percent underwater on their mortgage. The announcement was made while the Secretary toured a Las Vegas neighborhood with Senate Majority Leader Harry Reid (D-NV) and Congresswoman Dina Titus.

“This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market,” said Treasury Secretary Tim Geither. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It’s a crucial step in our broader efforts to get America’s housing market and economy on the path to recovery.”

Las Vegas is the ground zero of the foreclosure crisis. Not only does the area lead the nation in foreclosures, more than two-thirds of current mortgage holders in the market have mortgages higher than their property is currently worth. Prior to the announced expansion, only those borrowers whose first mortgage did not exceed 105 percent of the current market value of their property were eligible for the program.

Donovan also announced plans to deploy HUD Foreclosure Rapid Response Teams to assess the area hardest hit by foreclosure, starting in Las Vegas. The Las Vegas team will consist of two-senior-level HUD Field staff having experience in Single Family Housing and community outreach. Over they next two weeks these team members will be determining the need in Nevada and surrounding areas. HUD will commit two full-time employees to implement the Foreclosure Rapid Response Team’s recommendations.

Additionally, HUD plans to deploy two Fair Housing equal opportunity specialists to the Las Vegas HUD office. HUD receive about 100 housing discrimination complaints annually from Nevada residents, more than double what was received in 2005. The Fair Housing specialists will conduct local outreach and education as well as receiving discrimination complaints and conducting investigations. With a local presence, HUD’s Fair Housing & Equal Opportunity office should make it easier for Nevada Residents to obtain justice and relief , to educate housing consumers about predatory lending and to conduct program compliance and monitoring in more than 3,000 public housing units and over 8,500 Section 8 Vouchers.

Is Trust Returning to the Mortgage Industry?

Jay Hammond — Wed, 01 Jul 2009 16:12:57 +0000

“The economy is based on trust,” said Dean Johnson, associate professor of finance at Michigan Technological University in Houghton, Michigan.

In situations like the recent housing bubble, or even the stock market collapse of 1929, where markets were driven by debt and fueled by the false expectation that values can only increase, trust can be a very fragile thing.

“One little blip and everything started to unwind,” Johnson said. “The particulars are different, but the basics are familiar.”

Trust, however, seems to be coming back, according to Johnson. If people are cautious and not spending money, the government and financial industry must take action to encourage capital liquidity. During the first half of 2009, this is exactly what they have been doing. And if the effects have not been as immediate as some would like and others needed, at least their efforts are beginning to take effect.

Why does Johnson believe trust is returning? He points to the Volatility Index, or VIX, which measures investors’ expectations of how volatile the stock markets will be. The VIX reached all-time highs in 2008.

“People think of it as the fear gauge,” Johson explained. “it’s encouraging that the VIX, though still high be historical standards, is down about 60 percent from what it was at its peak in November.”

Other, more recent, signs that trust is being rebuilt in the American housing/real estate markets and the financial industry include:

USA Today reports that while the construction market remains weak the housing market may be improving slightly. Residential construction reportedly dropped to the lowest level since December 1995. Pending homes sales increased slightly in May, according to the National Association of Realtors (NAR).
Proposed legislation to create a Consumer Financial Protection Agency is making progress at the federal level, according to the Washington Post. The Post reports that the Treasury Department’s proposal for a new federal agency to consolidate the plethora of state and federal regulators responsible for overseeing the lending industry arrived on Capitol Hill on Tuesday.
At the end of June, Fannie Mae, which is still under the conservatorship of the federal government, reported its mortgage portfolio grew at a compound annual rate of more than 35 percent in May. A report from Dow Jones appearing in the Wall Street Journal indicates a large jump in the issuing of mortgage-backed securities offset continued rises in single-family and multi-family mortgage delinquencies.

Notes of caution, however, are also being heard. Yale University economist and co-founder of the S&P/Case-Schiller home-price index, Robert Schiller told Bloomberg: “At this point, people are thinking the fall is over. The market is predicting the declines are over.” At the same time he is “not optimistic that we’re going to see any sharp rebound.”

Johnson agrees with Schiller.

“It’s still a risky market,” Johnson stresses. “This is the first time in history that you’ve been better off if you’d put your money under a mattress 10 years ago. But hopefully, this indicates that the financial markets are returning to normal.”

Of course this doesn’t mean the housing market or the financial industry will be returning to the halcyon days of pre-mortgage crisis days anytime soon. It doesn’t matter how badly investors, bankers, consumers, lenders, the government or the world at large want it.

“There’s no easy fix,” Johnson concluded. “We have to take our medicine. It took 20 years to create the over-leverage and it will take time to undo that.”

Recovery? Mortgage apps down, prime delinquencies up

Constantine von Hoffman — Wed, 01 Jul 2009 14:33:17 +0000

Today is the day the recovery starts, at least according to those peering into the rosiest-colored crystal balls. The Wall Street Journal dug up these great examples:

Most forecasters seem to expect growth to be weak for a few quarters, but then rebound back to trend in the second half of 2008… –Lehman Brothers research note, Dec. 12, 2007

What is shaping up as the deepest and longest recession since the 1930s will end in the second half of 2009. –Wells Fargo press release, Dec. 19, 2008

And what news did we wake to on this glorious July 1?

First, mortgage application dropped 30% last week. The report from the Mortgage Bankers Association says this is a the lowest the rate has been at in seven months. Biggest reasons for this are people’s concerns about their jobs and mortgage rates. Currently the 30-year fixed is averaging 5.34%.

Second, delinquency rates for the LEAST RISKY MORTGAGES more that doubled in the first quarter compared to the same period in ‘08.

Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.

(Hat tip to Implode/Explode)

These are just the latest evidence of the new wave of foreclosures. A month ago Mark Hanson of the Field Check Group wrote that the price-collapse we have been seeing in low- to mid-priced homes is now spreading to the mid- to high-priced sectors.

Mid-to-high end [Notice of Disclosure] and foreclosure counts stand between 35% and 40% of total counts but account for only about 20% of total sales. This means that foreclosure-related pipeline supply is 100% greater than demand in this segment. This is a major supply/demand imbalance that will bring serious trouble to this market over the near-term. Especially considering that this particular foreclosure related supply only makes up approx 10% of total mid-to-high end supply with Ma and Pay Organic homeowner once again making up the rest.

(Hat tip to the Financial Armageddon blog.)

Given Mr. Hanson’s impressive track record I am inclined to believe his predictions and wonder why Lehman Bros., Wells Fargo, et al., can’t do as well. Probably has something to do with his lack of a vested interest.

So the much vaunted recovery continues to recede farther into the distance. Surprise, surprise, surprise.

Constantine von Hoffman is a veteran business journalist and social media consultant. He write the blog CollateralDamage, a satirical look at marketing and business.

New Report Links Foreclosures and Homelessness

Jay Hammond — Tue, 30 Jun 2009 16:24:53 +0000

“Local reports indicate that homelessness is on the rise and this report [Foreclosure to Homelessness] gives us insight into the role that foreclosures may be having on that increase,” said Nan Roman, president of the National Alliance to End Homelessness.

The Foreclosure to Homelessness: The Forgotten Victims of the Foreclosure Crisis report released last week provides insight into how foreclosures have affected homeless populations around the country. Based on surveys completed by 178 organizations across the U.S. that provide services to individuals and families experiencing homelessness it was determined that the nation’s homeless population has been directly impacted by foreclosure and that the is likely to increase along with the number of foreclosures. Nearly 80 percent of the respondents reported that at least some of their clients became homeless due to foreclosure. The leading self-reported reasons for homelessness, however, remain financial obstacles like job loss, addiction and evictions, according to additional information gathered by the Alliance to End Homelessness.

“The results of this survey make clear that foreclosures are a major factor in the increase of homelessness in the United States,” National Low Income Housing Coalition (NLIHC) President Shelia Crowley said.

Conducted earlier this year between January 15 and February 21, the data collected by the survey reflects the previous 12-month period. Other key findings include:

Housing providers (including emergency, transitional and permanent housing) estimated that 5 percent of their clients experienced homelessness as a result of foreclosure compared to 10 percent of all respondents.

34 percent of responding organizations indicated none of their clients were homeless as a result of foreclosure however 14 percent of those surveyed estimated that most of their clients were homeless due to foreclosure.

Those experiencing homelessness due to foreclosure tended to be renters – not owners.

Most of those facing homelessness because of foreclosure, whether renters or owners, did not seek legal advice in foreclosure proceedings.

The most common living situations among those made homeless by foreclosure included staying with family or friends and emergency shelters.

“We’re grateful that since the time this data was collected, federal actions have provided communities with resources to prevent and end homelessness, in the form of stimulus dollars and renter protections.”

The 40-page report was released by the Alliance along with the National Coalition for Homelessness, the National Health Care for the Homeless Council (NHCHC), the National Association for the Education of Homeless Children and Youth (NAEHC), the National Law Center on Homelessness and Poverty (NLCHP), the National Low Income Housing Coalition (NLIHC) and the National Policy and Advocacy Council on Homelessness (NPACH).

Another study, Renters in Crisis by Shelia Crowley and Danilo Pelletiere of the National Low Income Housing Coalition and Maria Foscarinis of the National Law Center on Homelessness & Poverty, that is also cited in the Foreclosure to Homelessness report, revealed the following facts regarding renters and foreclosures:

In 2008, one of every five properties in foreclosure were rental properties. Many had multiple units.

An estimated 40 percent of families facing eviction due to foreclosure are renters.

Seven million households living on very low incomes (31 to 50 percent of the Area Median Income) are at risk of foreclosure.

Renters received important new federal protections when President Obama signed the Helping Families Keep Their Homes Act in May 2009. The Act states that tenants must be given at least 90 days notice to vacate once a property has been foreclosed on and have the right to occupy the premises until the end of any term entered into under a bona fide lease agreement made prior to the notice of foreclosure is given unless the property will become the owner’s primary residence. Further, the Act protects renters receiving Section 8 assistance by preventing eviction during the term of their lease just so the new owner can sell the property. These and other provisions, while helpful, will not completely solve the problems renters and tenants face during foreclosure.

To assist tenants facing foreclosure, NLIHC has teamed up with the National Housing Law Project (NHLP) to create a toolkit for renters facing eviction due to foreclosure. The toolkit, which is available on the NLIHC website, includes a copy of the law, a one page explanation of its provisions, a question and answer document for tenants, sample letters to send to landlords, judges and public housing agencies and a webinar explaining the new law.

“Under the law, these blameless victims of the foreclosure crisis are now protected,” said Crowley. “The toolkit provides tenants and their advocates with the information necessary to protect families from being evicted unlawfully.”

Some activists and advocates for the homeless have promoted the idea of moving homeless families and individuals into empty properties that are in foreclosure. In April 2009, Real Estate Pro Articles detailed some of the efforts to allow homeless persons to occupy vacant homes occurring around the country. The New York Times also explored this issue back in February 2009. Since April, however, stories about this alternative have largely vanished from media and the blogoshpere although the release of this new report may revitalize interest.

Subprime Bananas

Morgan — Sun, 28 Jun 2009 23:07:08 +0000

A great post from Homegrown Evolution on one of the surprising benefits of the housing meltdown: fresh fruit. That’s right. The blog thanks Mr. Mozilo for creating our very own ‘Banana Republic’ as rundown homes and unmanned irrigation systems create the perfect environment for the growth of amazing tropical delights.

These subprime bananas as the blog calls them, were the result of a foreclosed home and a wayward sprinkler system. Homegrown Evolution is a blog maintained by the authors of “The Urban Homestead“. Hat tip Boing Boing for finding this gem.

From Homegrown Evolution:

There’s a house in our neighborhood that’s been for sale for over a year. Two months ago the for sale signs disappeared, junk mail littered the front porch and the mow and blow guys stopped showing up, leaving the lawn to go wild. A busted sprinkler head creates a nightly fountain as the houses’ infrastructure lapses into a timer operated zombification. We knew the nice young family that used to live here and I hope that they were able to sell somehow, but it doesn’t look good.

I started picking up the junk mail to make the place looked lived in. I also remembered that the backyard had both figs and bananas, and ventured beyond the gate to see how the fruit was developing (fyi, picking up fallen fruit is important to keep down the rat population). The figs aren’t quite ready but the bananas, the ones the squirrels didn’t get, were the tastiest damn bananas I’ve ever eaten. It turns out that our national real estate bubble has a fruit filled silver lining. I imagine that all across America there are abandoned fruit trees yielding their bounty for a new generation of gleaners. Thank you Angelo Mozilo for creating a literal banana republic!

Maybe a little scouting in your neighborhood can yield some delicious homegrown summertime fruit too!

Why is Citigroup still in business?

Constantine von Hoffman — Fri, 26 Jun 2009 18:14:47 +0000

It’s been quite a week for Citi.

Tuesday it walked into a feces storm of its own making by announcing it would raise salaries by 50% to offset cuts in bonuses.

To be fair to Citi, they are taking (well-deserved) crap for the entire industry on the salary issue. BofA, Morgan Stanley, UBS and others are also trying to dodge the bad PR when huge bonuses are awarded following huge losses. So now instead of bonuses for bad performance execs will just get a huge salary for bad performance. It’s all about retention – or so Citi would like us to believe. Quote from the NYT: “Citigroup executives are so eager to keep employees from fleeing, that in some cases, they are offering them guaranteed pay contracts.” Well, given that those contracts are being paid for with $45 billion of US taxpayer debt who can blame them. Citi is once again free to play with someone else’s money and are being just as responsible as they were the last time. BTW, the idea that these raises are going to the rank-and-file is absolute hogwash. As Alphaville notes, “the biggest increases will go to investment bankers and traders.”

Also on Tuesday, Citi temporarily stopped buying new loans after “discovering” it was missing property appraisals and documents showing borrowers’ incomes.

The discovery came in Citi’s correspondent division, which buys loans from banks and independent mortgage firms, and was responsible for about half of the bank’s $115 billion in mortgages last year. Two great quotes about this:

“There remain key areas that fall short of our quality- control process. We ask you to review your processes and join us in this effort to collectively address these areas of concern.” — Brad Brunts, a managing director at the bank’s CitiMortgage division.

And this from an analyst

“It is better to pull people off the line, and have a thorough re-education of what goes into a loan, so they can come back and do this the right way.”

Not a good sign when you have to re-train people processing mortgages on the most basic elements of how to do their jobs. Are these some of the folks being offered those guaranteed contracts?

Finally, today Japan ordered Citi to halt the marketing of all financial products to retail customers for a month because of bank “failed to implement sufficient measures aimed at preventing suspicious transactions, including money laundering.”

This really takes the idea of not verifying income to a new level.

RealityFrame’s comment about the raises could really be applied to pretty much everything the bank touches: Anybody want to dispute that those banksters aren’t indeed the "best and the brightest"?

Constantine von Hoffman is a veteran business journalist and social media consultant. He write the blog CollateralDamage, a satirical look at marketing and business.

41 Charged as Mortgage Fraud Hits Condos & Suburbs

Jay Hammond — Thu, 25 Jun 2009 00:51:17 +0000

Federal law enforcement officials recently announced charges have brought against 41 defendants in five separate cases in Chicago. The cases involve more than $48 million in fraudulently obtained mortgages for dilapidated homes in urban areas as well as deals involving million dollar condominiums in a Chicago high-rise and sprawling homes in affluent suburbs like Wheaton and Glenview. The vice president of a title company, mortgage brokers, loan officers, appraisers, real estate investors and an attorney are among the 37 defendants charged.

“Mortgage fraud is a serious issue that affects not just financial institutions but ordinary citizens who may have invested in such financial institutions or who hope to purchase, sell or refinance a home by honestly setting forth their finances. Today’s charges also show that the mortgage fraud issue affects suburbs as well as cities,” said Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, who announced the charges along with Robert D. Grant, Special Agent-in-Charge of the Chicago Division of the FBI and Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development (HUD) Office of Inspector General in Chicago.

Among the cases are:

U.S. v. Lisnek, et al. is one of the most comprehensive mortgage fraud schemes ever charged in Chicago. The 22-count indictment names 19 defendants, including LaSalle Title Company and three other businesses, who allegedly schemed to fraudulently obtain loans totaling more than $10 million on 70 residential properties in Chicago, including many blighted homes on the city’s South Side between 2002 and 2007. The resulting losses by various mortgage lenders totaled approximately $5.8 million.
The 23-count indictment returned in U.S. v Askar, et al. names 10 defendants accused of scheming to fraudulently obtain loans totaling more than $17.2 million on various multi-million-dollar condominiums and penthouses at 33 West Ontario St., also known as Millenium Centre. Between July 2004 and December 2006 the co-defendents are alleged to have fraudulently obtaining more than $17.2 million in loans to purchase nine Millenium Centre units.
Six defendants accused of fraud and using stolen or fictitious identities to fraudulently obtain approximately $3 million in home loans from various lenders by submitting false applications for loans in U.S. v. Okulaja, et al.
In another $3 million mortgage fraud scheme, the nine-count indictment in U.S. v. Beck, et al. alleges six defendants were purported to be in the business of buying, repairing and reselling real estate.
U.S. v. Luckett charges the chief executive of a Burr Ridge mortgage lender who allegedly defrauded GMAC Bank out of approximately $15 million in funding more than 450 fictitious residential loans.

All the charges filed in these cases are felonies. They carry a variety of maximum penalties including 30 years in prison and a $1 million fine on each count of mail and wire fraud affecting a financial institution or 20 years in prison and a $250,000 fine if no financial institution was affected. Alternatively, the court may impose a maximum fine totaling twice the gain to any defendant or twice the loss to any victim, whichever is greater. If convicted, the four business entities charged each face a maximum penalty of five years probation and a $500,000 fine.

“People who would want to commit this crime should understand there’s a lot of attention being focused on it, and we’d like to think that we have our ears up,” Fitzgerald told the Chicago Tribune.

Roubini: No confidence in government exit strategy

Morgan — Wed, 24 Jun 2009 22:34:58 +0000

In this Bloomberg segment Dr. Nouriel Roubini shares his thoughts on why pundits proclaiming the stabilization of the housing market are wrong and why the current policy path is unsustainable and likely to have a messy exit. My favorite part? The idea of our debt ballooning from 40% GDP to 80%. Lovely. Can you say bust?

Definitely worth watching:

Goldman bonuses largest in firm’s 140-year history

Morgan — Mon, 22 Jun 2009 06:05:54 +0000

The Guardian is reporting that Goldman Sachs staff can expect the largest bonuses in the firm’s 140 year history as the investment bank has leveraged (pun intended) dwindling competition and the brokering of US debt issuances to massive first quarter profits. The bank, on track for a $2.5+ billion profit will be doling out large chunks to the bankers that helped rake in the cash.

Funny, how a bank that recently owed $10 billion to the US government and defined the corporate excess that sent Wall Street into a tailspin is now readying itself for massive bonuses. I wonder what they’re doing in the PR department? Sweating bullets is my guess.

This ridiculous profiteering and payout adds a bunch of credibility to the TARP as elaborate ruse to protect Citibank theory that’s been bandied about as of late.

I’m just glad so much has changed. Sigh.

From the article:

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

…

In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year’s payouts are on track to be the highest for most of the bank’s 28,000 staff, including about 5,400 in London.