Category Archives: Housing

Foreclosures and existing home sales data

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this is telling:

From a contact in Texas:

When I went to the bankruptcy / foreclosure auctions here a few weeks ago I found out that the whole thing is a charade. Bank of America (for instance) auctions off houses that have gone into foreclosure for the amount owed plus any carrying costs which usually makes the auction price higher than what was owed. A pre-bid was submitted by Bank of America Home Loan Servicing (the rename for Countrywide) in the exact amount of the auction minimum (mortgage owed plus carrying costs). No one else bids so the house is “sold” by Bank of America to Bank of America Home Loan Servicing. In essence, the property is simply transferred from one division to another so that clear title is established. But this is counted as an existing home sale which artificially inflates existing home sales numbers. This is what was happening for most of the 102 BAC mortgages and the 130 Wells Fargo mortgages. For the house I “rent” where the original mortgage was with Countrywide (and then transferred to B of A when B of A bought the property) this is simply a process for getting the house off of B of A’s books and back on Countrywide’s books (now BAC Home Loan Servicing). As I said, it is all charade or smoke-and-mirrors or a shell game.

Later Bank of America Home Loan Servicing will contact a realtor who will eventually put the house on the market for sale. Let’s say that the auction price was $200,000 but the house is now worth only $150,000. The house hopefully gets sold for $150,000 so that the “loss” is reduced from $200,000 to only $50,000 and the property is disposed of. Of course when this house is sold by the realtor it is again counted as an existing home sale.

Staggering 22 % of The State Of Florida are in Some Stage Of Forclosure

A staggering 22 percent of all mortgages in the state of Florida are non-current, according to a new report from Lender Processing Services.

By non-current, they mean loans that are either delinquent or in some stage of foreclosure; perhaps more troubling is the fact that 10.4 percent of home loans in Florida are in foreclosure.

The LPS October Mortgage Monitor also revealed that the nation’s foreclosure rate was 3.12 percent as of September 30, up 2.6 percent from a month earlier and 88.9 percent year-over-year.

And remember that’s with all the government intervention, foreclosure moratoria, loan modifications, and the like; the national mortgagedelinquency rate was 9.37 percent as of September 30.

The report also highlights the large shadow inventory of foreclosed properties that could wreak havoc on home prices and a possible housing recovery.

“The number of loans deteriorating further into delinquent status is now more than twice the number of foreclosure starts, indicating another major wave of troubled loans in an already clogged loan pipeline,” the company said.


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Goldman disclosure controversy

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Looks like it all comes down to whether Goldman violated the law by not disclosing what it was obligated to disclose.

There is no question the institutional structure that leads to this type of activity is flawed in that it doesn’t work for public purpose.
In fact, large elements of the financial sector do not serve public purpose.

Much of the financial sector is set up, by law to function as a casino, where each bet necessarily has a long and a short, presumably towards so further public purpose to allow public/private partnerships including banks, pension funds, and insurance companies to participate.

Unfortunately it’s never discussed at this fundamental level in the public debate, which is one of the reasons I’m running for President- to bring that debate back to public purpose- the fundamental behind government and the institutional structure:

How Goldman secretly bet on the U.S. housing crash

By Greg Gordon

WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.


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renting foreclosed houses to former owners

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I proposed this when the crisis first hit. Too late for millions of people in thousands of neighborhoods:

“Fannie Mae, the country’s largest mortgage holder, announced today that it is adopting a version of a “right to rent” policy under which foreclosed homeowners will be allowed to stay in their home paying the market rent. Under Fannie Mae’s Deed for Lease Program, foreclosed homeowners will be offered a lease of up to one year, in exchange for turning over the deed to their home. The lease will be at the prevailing market rent.”


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Mtg apps

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No sign of housing improvement here:

The MBA’s seasonally adjusted purchase index fell 1.8 percent to 250.3. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 5.5 percent.

Refinancing Jumps

The Mortgage Bankers seasonally adjusted index of refinancing applications increased 14.5 percent to 2,693.7.


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alternative to first time homebuyer proposals

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Instead of tax credits, maybe have the housing agencies offer 0% down loans to first time home buyers, and reimburse the agencies for any associated losses up to $8,000, or whatever number they deem appropriate, etc?

It’s functionally nearly identical, a lot less ‘regulatory intensive,’ and not an immediate ‘budget item.’


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Four-Year-Old Got Homebuyer Tax Credit, Treasury Says

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Thanks, this type of thing fuels the ‘govt can’t do anything right’ constituency.

I’m always careful to make proposals that minimize incentives for fraud and abuse, and also minimize the amount of regulation and supervision needed to ensure compliance.

Hence, I’ve proposed the payroll tax holiday and per capita revenue distributions to the states to support aggregate demand.

Four-Year-Old Got Homebuyer Tax Credit, Treasury Says

By Dawn Kopecki

Oct. 22 (Bloomberg) — Children as young as four years old have
improperly received first-time homebuyers tax credits as the U.S. failed
to adequately screen filings, a Treasury inspector general told
lawmakers today.

“Some key controls were missing to prevent an individual from
erroneously or fraudulently claiming the credit and receiving an
erroneous refund of up to $8,000,” Treasury’s J.
Russell George told the House Ways and Means Committee’s oversight
panel.

More than 1.2 million borrowers through Oct. 9 have claimed almost
$8.5 billion of the $13.6 billion set aside for “first- time” homebuyer
tax credits this year, George said.

George said the IRS has identified almost 74,000 claims that may
not have qualified as first-time homebuyers. They also found that 580
taxpayers under 18 years old and therefore ineligible to buy a home
claimed almost $4 million in tax credits.

The credits, which are available for taxpayers who haven’t owned a
home in the last two years, are credited by Realtors and mortgage
bankers with helping to stabilize home sales this year following the
worst housing slump since the Great Depression.

Lawmakers in the Senate are pushing to extend the credit beyond its
Nov. 30 expiration and expand it to more borrowers.

“Every time Congress creates a new refundable credit — meaning
that individuals can get a check from the government whether or not they
have actual tax liability — the incentive for fraud is magnified,”
Louisiana Representative Charles Boustany, the subcommittee’s
top-ranking Republican, said during the hearing.

Waste, Fraud and Abuse

If Congress extends the credit, the IRS needs to institute better
controls to prevent waste, fraud and abuse, Boustany and Chairman John
Lewis, a Georgia Democrat, said.

Federal auditors also found claims in excess of the maximum amount
allowed, with improper documentation or that exceeded the income
requirements of $75,000 per individual and $150,000 per couple.

Senate Banking Committee Chairman Christopher Dodd and Senator
Johnny Isakson, a Georgia Republican and former Realtor, urged
colleagues at a separate hearing this week to extend the credit through
next June and to expand it to all couples earning $300,000 or less.
Isakson estimated that his plan would cost less than $17 billion in lost
tax revenue.

Purchases of existing homes in August were up 3.4 percent compared
with a year earlier, the National Association of Realtors said. New home
sales were up 30 percent from January’s record low, government figures
show.

Shaun Donovan, secretary of the Housing and Urban Development
Department, called the tax credit a “positive force” in the housing
market during the Oct. 20 hearing before the Senate Banking Committee.

“The end of the tax credit would have some negative affect in the
market,” he said. He said he doesn’t think it would cause a
“catastrophic decline” in home prices.


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Home-Buyer Credit Is Focus of Inquiry

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>   
>   (email exchange)
>   
>   On Tue, Oct 20, 2009 at 12:13 AM, Russell wrote:
>   

Reference article:

Home-Buyer Credit Is Focus of Inquiry

>   
>   The Internal Revenue Service is examining more than 100,000 suspicious
>   claims for the first-time home-buyer tax break …
>   
>   The tax credit is completely refundable, even if the homebuyer has no tax
>   liability – and this makes it a target for fraud. From the IRS:

Link

>   
>   ”[The tax credit is] fully refundable, meaning the credit will be paid out
>   to eligible taxpayers, even if they owe no tax or the credit is more than
>   the tax owed.”
>   
>   Also, the credit is separate from the closing, and the WSJ article suggests
>   this is contributing to the “widespread” fraud.
>   
>   Bonnie Speedy, national director of AARP Tax-Aide … suggested that abuse of
>   the home-purchase credit appeared to be widespread …
>   
>   And – not mentioned in the article – the homebuyers are required to pay back
>   the tax credit if they do not own and live in the home for three years … so
>   there will probably be more fraud in the future. More IRS:

Link

>   
>   The obligation to repay the credit on a home purchased in 2009 arises only if
>   the home ceases to be your principal residence within 36 months from the date
>   of purchase. The full amount of the credit received becomes due on the return
>   for the year the home ceased being your principal residence.
>   

Right, critical parts of any legislation include compliance/enforcement.

All of my proposals look to reduce real compliance and enforcement costs, and to minimize the potential for fraud.

For example, the payroll tax holiday has none of those issues, nor does it place any demands on govt.
Same with the per capita revenue sharing. The main risk is States that may somehow inflate their population estimates, but that is trivial, and the distributions are done on past estimates.


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UK Bank rate to ‘stay frozen’ for 5 years

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Thanks, Dave, if this is the new mainstream conventional wisdom it looks like the monetarists have somehow gotten back in control.

Their transmission mechanism that increases demand seems to be asset prices and the exchange rate for export growth and reduced imports via higher domestic prices with the implied currency depreciation.

In fact it’s a policy of ‘both feet on the brakes’ which would mean moving towards a Japan like rates environment.

Hard to believe this actually will happen. Very, very odd.


Interest rates in Britain are to stay low for years to compensate for a severe fiscal squeeze on the economy, a report to be published this week says.

The Centre for Economics and Business Research, in its latest UK Prospects, to be published tomorrow, predicts that Bank rate will remain at 0.5% until 2011 and not reach 2% until 2014.

It also expects further quantitative easing by the Bank of England on top of the £175 billion so far announced, and says that the programme of asset sales will not start to be rolled back until 2014 at the earliest.

Its forecast is based on the assumption that an incoming government will announce £100 billion of fiscal tightening, split between £20 billion of tax rises and £80 billion of spending cuts, over the lifetime of the next parliament.

With this fiscal tightening putting a brake on growth, the Bank will be obliged to keep interest rates down, the CEBR argues.

“We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward,” said Doug McWilliams, chief executive of the CEBR and one of the report’s authors. “Our analysis says that this ought to work. If it does so, we are likely to see a re-rating of equities and property, which in turn, should stimulate economic growth after a lag.”

The forecast implies a good outlook for the stock market and house prices, but could put further downward pressure on sterling.

Charles Davis, a senior CEBR economist and co-author of the report, said the main risk was a rise in inflation from higher commodity prices, which could force the Bank’s hand.

Inflation figures this week should show a drop from 1.6% to 1.2%, which City economists expect to be the low point. Higher Vat at the turn of the year is likely to push inflation temporarily above the official target. Unemployment figures will also be released this week.

+ Profit warnings fell to a six-year low in the third quarter, Ernst & Young, the accountant, said. There were 52 warnings from quoted UK companies, a year-on-year drop of 53%, and 17% less than in the second quarter.

Ernst & Young said, however, that the decline did not mean the worst was over. “This dramatic fall is due to a complex mixture of previously withdrawn company guidance, already depressed market expectations and an improving economic outlook that has encouraged companies to look ahead with greater confidence, with the worst of the downturn seemingly past,” said Keith McGregor, restructuring partner at Ernst & Young.

“Nevertheless, confidence should not turn to complacency. The one-off effects of monetary and fiscal stimulus, and inventory rebuilding have put a gloss on current demand that could soon tarnish once this support is withdrawn.”


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