Serious delinquency rate drops annually for first time since 2007

Monday, November 29th, 2010, 10:09 am

The serious delinquency rate on single-family mortgages held by Fannie Mae was 4.56% in September, a 16 basis point drop from September 2009 and the first yearly decline since April 2007.
In April 2007, the serious delinquency rate was at 0.62%, down 2 bps from April 2006.
The September 2010 rate, the latest available from Fannie Mae, also marked the seventh-straight monthly decline. It was down 14 bps from August.
The last time the delinquency rate increased from the previous month was in February, when it climbed 7 bps to 5.59%. It has averaged a roughly 14 bps drop every month since to what is now its lowest point since August 2009.
Fannie Mae mortgage-backed securities issuance held flat in October at $69.6 billion, roughly the same as the previous month but up roughly 71% from a year ago. So far in 2010, Fannie Mae has issued $472.6 billion in MBS. In 2009, Fannie issued $807.8 billion.
The Fannie Mae gross mortgage portfolio declined in October to $798.2 billion, down 0.5% from the previous month but up 3.5% from a year ago.

Your Mortgage Minute for the week of November 22, 2010

Mortgage markets worsened last week as the U.S. dollar gave up ground in currency markets, and inflation concerns mounted. In response to the events, conforming mortgage rates in California rose for the third straight week. Mortgage rates have now climbed by as much as half-percent since the start of the month, and Freddie Mac reports average loan fees to be higher, too. The 7-month rally in rates may be nearing its end. The 30-year fixed rate mortgage is at a 4-month high after reaching an all-time low just 3 weeks ago.
The abrupt change in rates makes for an interesting study in expectations, and how they can influence a market. Remember, inflation is bad for mortgage rates. Inflation devalues the dollar which, as a consequence, devalues repayments made to mortgage bond holders. As a result, when inflation is present, mortgage bonds tend to sell-off which causes mortgage rates to rise.
This is what’s been happening these past 3 weeks. However, we’re not in an inflationary environment. To the contrary:

1.     The Federal Reserve has said inflation is too low to be economically healthy

2.     Last week, the Cost of Living posted its lowest year-over-year gain in history

But mortgage rates are rising anyway. This is because global investors believe the Fed’s most recent market intervention — a $600 billion bond purchase program — will later lead to inflation. Just on the expectation, markets are behaving like inflation is already here.
This week is holiday-shortened, and rates should remain volatile. There’s a bevy of data including the Existing and New Home Sales reports, consumer confidence data, and the FOMC Minutes from the November 3 meeting. If you haven’t locked a mortgage rate, consider locking one today. Rates have farther to climb than the fall

California was 2nd Best Among Nationwide Real Estate Sales (OC Register)

How bad of a summer was it for real estate nationwide? Well, you know it wasn’t pretty in California!

Best states	Sales Q3	Qtr. Chg.	Year chg.
Nevada	87,200	-6.4%	-17.4%
California	439,600	-7.3%	-13.0%
Virginia	103,200	-12.8%	-17.0%
Florida	350,000	-13.9%	-1.0%
Georgia	148,800	-13.9%	-15.8%
Worst states	Sales Q3	Qtr. Chg.	Year chg.
Alaska	16,800	-38.2%	-26.3%
Nebraska	24,400	-39.0%	-33.0%
Iowa	41,200	-41.8%	-29.5%
North Dakota	9,200	-43.9%	-34.3%
Minnesota	60,800	-45.7%	-37.4%
Nationwide	Sales Q3	Qtr. Chg.	Year chg.
Total	4,163,000	-25.3%	-21.2%

New Realtor data shows that California single-family home re-sales fell 7.3% from the second quarter to the third quarter as a federal tax break for buyers expired. That left California home-buying’s pace 13% below a year ago.

However, that 7.3% quarter-to-quarter decline in California was the second best performance — yes, B-E-S-T — among the states.

Only Nevada — down 6.4% — fared any better. Hardest hit state was Minnesota, off 46% in those three months alone! Nationwide, it was a 25% tumble.

Perhaps California’s advantage — if we can call this a plus — was the tax break (worth up to $8,000) was likely not a major deal to our house shoppers. So any springtime home surge created by shoppers’ desires to qualify for the tax break — as we heard of elsewhere — was not a major factor. Still, considering all the real estate angst around this region, you can see why people are REALLY worried about housing elsewhere!

Curiously, here’s another snapshot of how things have changed: Our state’s recent relative recent “strength” makes California 11% of the U.S housing market, by single-family homes resold — largest share of any state. That’s up from 6% near the market’s peak in 2007.

Your Mortgage Minute Update for the Week of November 15, 2010

In a holiday-shortened trading week, mortgage markets tanked last week, casting doubt on whether the bond market’s 7-month bull run will continue. Fears of inflation caused conforming mortgage rates to rise in California. Last week marked the first sizable mortgage rate increase over the course of 7 days since April. The biggest reason why rates rose last week was because of concerns that the Federal Reserve’s latest round of stimulus will devalue the U.S. dollar. The Fed pledged an additional $600 billion to the bond markets two weeks ago and, to meet this obligation, the group will have to, quite literally, print new money.
It’s Supply and Demand. With more dollars in circulation, every existing dollar is worth less. It’s also inflationary. As the Fed’s pledge ties back to mortgage rates, remember that mortgage bondholders are paid in U.S. dollars. So, if those dollars are expected to be worth less in the future, we would expect mortgage bond demand to fall. And that’s exactly what happened last week — investors rarely clamor for assets whose value drops over time. The falling demand dropped down prices, and pushed up yields. Mortgage rates spiked.
This week, the trend could continue. There’s a lot of inflation-signaling data on tap:

• Monday : Retail Sales
• Tuesday : Producer Price Index; Consumer Confidence; Housing Market Index
• Wednesday : Consumer Price Index; Housing Starts
• Thursday : Initial and Continuing Jobless Claims

Analysts are calling for lukewarm data this week; none of the releases is expected to show strong growth. If the analysts are wrong, look for rates to rise again. Momentum is moving away from rate shoppers. If you’ve yet to lock in a rate, consider doing it now.

The Eleven Reasons People Can't Sell Their Homes

The environment for home sales becomes more difficult with each passing month. Some estimates put 11 million mortgages, about 20% of the U.S. total, underwater, meaning that homeowners owe their banks more than the underlying properties are worth. Home repossessions reached more than 100,000 for the first time in September. Rising foreclosure rates continue to further depress housing prices.
The federal government let its tax benefit for homeowners expire in April and has not renewed it since them. The program did boost sales earlier this year. Shoppers must now face a market without the credit in which many home prices continue to fall.

More from 24/7 Wall St.: • The Best and Worst Run States in America • More Evidence Apple Will Eventually Rule the PC World • Many Doomed Americans Aren't Saving for Retirement

The clamor over flawed foreclosure paperwork and robo-signers could further chill the housing market. People who might buy have bought a home in foreclosure will now worry about obtaining proper documentation and effective transfer of title.
24/7 Wall St. spoke with experts at real estate research firms Zillow.com and RealtyTrac to find the best way to sell a home. We also interviewed management from the National Association of Realtors, a number of real estate brokers, bank managers and elected officials in affluent communities. What emerged from these conversations and our research is the following: successful home sellers often do the same small number of things correctly. Often, these tactics are the difference between finding a buyer and not.
1. Pick the Best Broker
Many people who decide to sell contact a real estate brokerage with a sterling reputation or go to one that has the largest number of listings. Frequently, when potential sellers call these firms, they are turned over to the first available broker in the office. That person is often not the best representative. As a matter of fact, what is a successful broker doing in the office anyway? There are a small number of brokers in most markets who have a better track record than their peers. Most of them have been brokers for a long time and did not lose their jobs when the housing bubble collapsed.
2. Get an Appraisal
Sellers should obtain an appraisal for their home before they put it on the market. One of the major reasons house sales fall apart is that the bank assesses the home for less than the buyer has agreed to pay. For example, a buyer and seller agree on a price of say $250,000. Then the buyer goes to his bank to get a mortgage. But, the bank appraises the house for $200,000. Now, the buyer has to put up more money. Sellers who get their own appraisals get a realistic idea of what price a bank would value a house at before they enter into a sale. Most appraisers already do some work for banks. An appraisal often tells a seller what a "safe" price is. And an appraisal's average cost is only about $200.
3. Get the Right "Comp"
Sellers must make sure that foreclosures in their area are included in the "comps" the Realtor gives them. Traditionally, a broker will give a seller a list of similar properties in the market and that information is part of what is used to set a price. What brokers do not always do is put the price of any foreclosed properties that are comparable into the calculation. A typical foreclosed home sells for 25% to 30% less than similar inventory in the same area. If sellers don't take that into consideration, their home will not be priced competitively and they put themselves at a disadvantage. Sellers wind up slashing prices after their overvalued properties are on the market for several months without success.
4. Tax Assessment
Low property taxes are critical to finding buyers. Property taxes in most cities, towns and counties have gone up for years as home values appreciated. This revenue is used to run schools and other local services. However, now home values have dropped sharply, and the appraisals by local authorities on which taxes are based are too high. Many cities have a process for homeowners to request lower appraisals, and as a consequence obtain a reduced property tax. Some states even have a board of appeals for homeowners who do not think they were treated fairly. One way for people to get local authorities to cut the tax assessment of their home is to put it on the market at below the appraised price. If the home does not sell for several months, they can present empirical evidence of the lower value. A home assessed for $300,000 that goes on the market for $275,000, but does not sell for a year, is probably not worth $300,000.
5. Conserve Utilities
Turn the lights off! Most buyers ask for utility bills. "Energy wasters" who sell a home will rue the times they forgot to turn off lights, turn down the air conditioner or left the TV on all day. It would be ill-advised to fake the amount of energy being used by simply living in the dark and cutting utility costs to nearly zero. However, careful and prudent use of energy can cut bills by enough so that a buyer does not have sticker shock about what it costs to maintain electricity, gas or oil to run a house.
6. Sell "Green"
Not very many homes are actually built with environmentally friendly material or heated by solar panels or wind. But those that are have a special appeal to the crowd that buys green cars such as the Prius. A seller may have one of only a few "green" homes in their town or city. That may make it highly desirable to many shoppers.
7. Curb Appeal
This item appears on most lists, and many sellers don't bother to take the advice to prune the hedges or clean the gutters. But it is even more complex than that. Walk to the road on which your home is located. Now walk toward the house. What does a buyer see for the first time? Most sellers never bother to look at their homes through a buyer's eyes. Do the shingles need a paint job? Are the shutters looking shoddy? "Love at first sight" is no less rare with homes than with people.
8. Everything Is Negotiable
Negotiate the fee with the broker. The fee paid to a Realtor for selling a home is traditionally 6%. Sellers often believe that they can get that down to 5% or even 4%. But, in a market where brokers are desperate for business, pressing for 3% or even 2% may work. Whatever the savings are, they can materially affect how much a seller can drop the price of his home and still walk away with a profit.
9. Get an Inspection
Sellers should do some of the inspection work and testing before their home goes on the market. Inspectors for buyers are often aggressive when they report what is "wrong" with a home to their clients. For as little as $250, an inspector will go through your house and tell you what the inspector is likely to flag such as a roof leak or old, energy-wasting windows. That gives the seller a chance to fix the problem for less than the buyer may want to lower the price by, or at least know the items that a buyer will use to negotiate down the price.
10. Hire a "Stager"
For as little at $200, you can hire someone who can make your home look better by moving pictures, furniture, lights and addressing problems that may make the home show poorly. These people are cousins to the men and women who "fix" expensive homes before magazines come in to photograph them for stories. "Stagers" have lists of tricks that few Realtors and almost no homeowners know. The "better" your home looks, the more appealing it will be to potential buyers.
11. Fix It First
Sell a house that does not need any work. In a market in which people count every penny and worry about job security, fewer buyers want homes that are "fixer uppers" that require work that could cost thousands or even tens of thousands of dollars to address. These days, a buyer choosing between two homes will most likely take the one that needs the least work. It may cost some money to get your home to the point where a buyer can walk in and do almost no work. However, it may be the difference between selling a home and having it languish on the market.

Lenders prefer foreclosures, not short sales

While the recent halt in foreclosures gave defaulting homeowners some breathing room and a glimmer of hope their lender might consider a modification or short sale, lenders are still reluctant to concede a short sale in favor of foreclosure.
Historically, lenders have never preferred short sales for fear homeowners will take advantage of them to cut their losses. A recent report found that 2% of annual short sales involve fraud, costing banks around $300 million.
A 2009 change in accounting policy by the Financial Accounting Standards Board (FASB) allows lenders to delay recording losses on foreclosures until the home is sold, while losses from a short sale must be marked immediately.
Bank of America (BofA) has only processed 61,000 short sales nationwide in 2010, compared to the millions of homes in foreclosure it services.
first tuesday take: Instead of the “cat and mouse” game for short sales or foreclosures, banks need to focus on cramdowns if Californians are to remain homeowners as desired by agents, builders and the government. Reducing principal to keep homeowners in their homes is a far better solution than initiating the on-again, off-again short sale, or adding another foreclosure or real estate owned (REO) property to the massive pile of destroyed homeownerships. [For more information regarding short sales, see the August 2010 first tuesday article, Short sales could be shorter.]
Blinded by total fear of declaring losses, lenders are stuffing more skeletons in their already bursting closets of rising delinquencies (through 2013), shadow inventory (recorded notices of default (NODs)) and delayed reporting of their insolvency. Instead of focusing on clearing out their patently unmanageable profusion of foreclosures, banks are adding to it. They are unwilling to take a direct and immediate principal reduction hit for the benefit of consumers, the nation’s housing policy and the greater real estate market — all of which are partially to blame.
Foreclosures are necessary for fast, quick recovery — they are a fitting solution for a default if they are actually completed, lest we wish to go the way of Japan in this financial crisis. Until the government forces them to write down their loan portfolios to current market value and reduce mortgage principal for underwater homeowners, prepare for your short sale requests to be absolutely denied on arrival. It keeps lenders solvent; on paper, with paper. [For more information regarding proposed changes to foreclosure, see the October 2010 first tuesday article, The foreclosure process needs to change, not halt.]
Re: “Short sales resisted as foreclosures are revived” from the New York Times

Your Mortgage Minute update for the week of November 8, 2010

Mortgage markets took a roller coaster ride last week, powered by the dual-force of the Federal Open Market Committee, and the government’s monthly Non-Farm Payrolls report. As standalone events, both releases would have ranked among the top market movers of the year anyway, but throw in the rest of the week’s data –including the release of key inflation figures and the midterm elections — and it’s no wonder the bond markets were so bumpy.
Huge gains and losses characterized day-to-day trading last week. Overall, however, conforming mortgage rates in California improved; fixed-rate mortgage rates fell slightly less than adjustable-rate ones. Recapping last week’s economic news:

• Core PCE, the Fed’s preferred inflation gauge, posted a lower-than-expected 1.2% annual growth
• The Federal Reserve announced a $600 billion package to support the economy; more than most estimates.
• According to the government, 151,000 new jobs were created last month. Economists expected 61,000.

Additionally, the Institute for Supply Management’s Manufacturing Index showed strong sector growth. With each new surprise, Wall Street’s expectations adjusted for the future and, therefore, mortgage rates changed. 
This week, the direction that rates take is anyone’s guess. First, there’s no substantive economic data due for release and, second, markets are closed Thursday for Veteran’s Day. The absence of data coupled with lower volume expected overall may mean that market momentum rules the week. In other words, if mortgage markets open the week better, they may close the week better, too. Conversely, if rates start rising, they could rise by a lot.

6 Simple Steps To $1 Million

Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Stop Senseless Spending Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month. (For related reading, see Squeeze A Greenback Out Of Your Latte.)

That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere - this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses. (To learn more, read The Disposable Society: An Expensive Place To Live.)

This doesn't mean that you shouldn't go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits. (For more insight, read Under 30 And Financially Secure In 10 Steps.)

Fund Retirement Plans ASAP
When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.

Unfortunately, retirement planning is an afterthought for many young people. Here's why it shouldn't be: funding a 401(k) and/or a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later. (To see how this works, check out Why is retirement easier to afford if you start early?)

How much difference will funding a vehicle such as a Roth IRA early on in life make?

If you're 23 years old and deposit $3,000 per year (that's only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it's clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest - your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you've lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That's still a sizeable fund, but you had to contribute $160,000 just to get there - and it's no where near the $985,749 you could've had for paying much less.

Improve Tax AwarenessSometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.

Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return. (To learn everything you need to know about filing your tax return, check out our Income Tax Guide.)

However, if you're not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return. (For more on this, see Crunch Numbers To Find The Ideal Accountant.)

Own Your HomeAt some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren't sure where we want to live for the longer term. And that's fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.

Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.) (For more insight on weighing this decision, read To Rent Or Buy? The Financial Issues.)

Avoid Luxury WheelsThere's nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice - especially since this asset depreciates in value so rapidly.

How rapidly does a car depreciate?

Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.

In short, especially when you are young, consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you'll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.

Don't Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.

Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Bottom LineYou don't have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don't have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

by Glenn Curtis (Contact Author | Biography)

Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.

Lender Rebates may be a thing of the past!

The Dodd-Frank Wall Street Finance Bill was signed into law by Obama last month. I've spent three weeks speaking with attorneys who have picked it apart. It's a disaster!! Our government walked into our Mortgage China Shop like a drunken bull on steroids. FACT: All loans have been CLEAN within the past 18 months. When was the last time you saw a subprime loan? How about an ALT-A or No-doc? The mortgage industry needed an antibiotic, the government prescribed a lobotomy. They produced a remedy without performing a diagnosis. Having the government monitor the lending industry is as brilliant as having Rosie O'Donnell guard a dessert tray.

The bill contains over 2,319 pages of pure junk. One of the originators, Chris Dodd made the same comment about this bill as Nancy Pelosi made about the healthcare bill: '"Let's pass it and figure it out later." In a nutshell; it closes one agency and establishes 22 others. It will be the largest government agency ever created. The largest expansion of government in our history!

Friends, this bill is so toxic to mortgage financing I don't know where to begin!

* If you are a Realtor specializing in home sales under $100,000, it might be time to find new employment. This bill caps financing costs. No wholesale originator will touch a loan under $100,000. I'll explain- There is a 3% cap on closing costs. Underwriting, processing, appraisal, survey, attorney, recording, mortgage policy, tax service, flood certs, credit report, etc…no room for an origination fee. That would be fine, however the bill removes lender rebates. And forget about writing a contract where the buyer pays the owners title policy!!

* Removal of lender rebates (yield spread). No longer will "no point" loans walk the earth. This will wipe out 50% of those purchasing FHA loans. The cost of refinancining a home will double. Our economy and the consumer are the biggest losers.

* Not wanting to leave any progressive stone unturned, Dodd-Frank had the audacity to sneak a "diversity" clause into the bill. The Equal Rights Act is not enough. If HUD audits my office and discovers that all of my employees look like me, I could be heavily fined or have my banker license revoked. My hiring practice has to be based on color, nothing else!!

* The bill calls for the removal of short-term ARMS. Consumers aren't intelligent enough to make short-term financing decisions so the government will make it for you.

* Want HVCC to go away? Your wish came true! Yes, HVCC is gone. Unfortunately, the process just became more complicated. A few months ago I sent an email saying, "the devil you know is better than the devil you don't know." The government controlling appraisal management companies is the devil we don't know. Expect hell!

Want a good laugh? As I stated, this bill consists of 2,319 pages. There is not one mention of Fannie & Freddy in the entire bill. The two entities responsible for 95% of the foreclosures in this country! Not one word!! (Hence, the word "sh*t" to describe this bill!)

Chris Dodd, a personal friend of Country Wide and Barney Frank, a personal friend of Fannie Mae wrote this bill. That is akin to Charles Manson writing children's books. Or, Paris Hilton teaching our daughters about abstinence. Or, economists saying our recession is over.

Unfortunately (or I should say understandably) NAR wants nothing to do with fighting this bill. NAR is running scared. Congress is looking into capping and taxing Realtor commissions. Now is not the time to take a high profile on anything it Washington. The inmates are running the asylum.

THE GOOD NEWS...

Ironically, the bill contains many RESPA violations. Lawyers are working behind the scenes on behalf of the National Association of Mortgage Brokers and Bankers. I'll keep you posted as things develop.

Fannie, Freddie Take Loan Files From Florida Law Firm

Fannie Mae and Freddie Mac have terminated their relationships with a top Florida foreclosure law firm and began taking possession of loan files on Monday afternoon from the firm, which processes evictions on behalf of the mortgage-finance giants.
Fannie and Freddie had previously suspended all foreclosures that had been referred to the law offices of David J. Stern in Plantation, Fla., a suburb of Fort Lauderdale.

More

• Fannie Mae Halts Firm's Foreclosure Work 10/26/10
• Complete Coverage: The Foreclosure Crisis

Freddie Mac took the rare step of removing loan files after an internal review raised "concerns about some of the practices at the Stern firm," a Freddie spokeswoman said.
"We have begun taking possessions of all files on Freddie Mac mortgages simply to protect our interest in those loans as well as those of the borrowers," the Freddie spokeswoman said. A Fannie spokeswoman declined to elaborate.
Fannie and Freddie said they will move those files to other law firms in the state but that they hadn't yet identified where they would be redistributed. The firms said they had notified Florida's attorney general about the decision to remove the files and that the Stern firm had cooperated with the action.
A lawyer for Mr. Stern didn't immediately respond to inquiries.
The Stern law firm has been at the center of allegations by the Florida Attorney General's Office of improper foreclosure practices. The office has released depositions of former law-firm employees who have alleged that the firm forged notarized documents and that employees signed files without reviewing them in an effort to speed through foreclosure filings.
Fannie and Freddie both provide lists of approved law firms to mortgage servicers that handle defaulted loans on behalf of the companies. Fannie said last week it was in the process of adding as many nine law firms to its legal network in Florida, doubling the current number of approved firms.
Freddie has as many as 10,000 foreclosures being handled by the Stern firm, according to people familiar with the matter.

Millions of homeowners keep paying on underwater mortgages

Reporting from Washington —

For almost two years, home foreclosures have swept the nation, spreading misery among once-buoyant families, spattering lenders with red ink and undermining efforts to restart the economy.

But a bigger problem may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst. It's not that these homeowners will stop making their payments. It's just the opposite — that they will keep doing it.

How could that be a source of future trouble? Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending — a drag on family finances, the housing market and the overall economy.

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And the drag could persist for years.

Of the estimated 15 million homeowners underwater, about 7.8 million owed at least 25% more than their properties were worth in the first quarter of this year, according to Moody's Analytics' calculations of Equifax credit records and government data.

More than 4 million borrowers, including 672,000 in California, 424,000 in Florida and 121,000 in Illinois — three of the biggest real estate markets — were underwater more than 50%. Their average negative equity: a whopping $107,000.

Many of these homeowners are paying much higher interest rates than the latest national average of 4.25%. They still have jobs and can afford to make the payments.

But they can't refinance because they owe too much. That home equity line of credit isn't going to happen. Even ordinary loans may be impossible to get. And selling the home at a huge loss is out of the question.

Nor can most underwater borrowers take advantage of the Treasury Department's loan-modification program, which generally requires a job loss or another kind of hardship.

In other words, they're stuck.

Heather Hines and her husband reflect this new reality. They owe $415,000 on a Santa Rosa, Calif., town house they bought in 2004 for $430,000. When the county appraised the three-bedroom home a few weeks ago, it was worth $246,000 — even less than a year earlier.

The couple had planned to move to a larger home after their two grade-school children became teenagers, but now that looks impossible. Their house needs a new roof, but they've put off replacing it for more than a year.

"It's hard to think of making that investment when you're hundreds of thousands underwater," said Hines, 37, a city planner who like her husband is employed and has an advanced university degree. "It just feels hopeless. What are we supposed to do? It feels like we're never going to see any equity in our home."

Theoretically, the Hineses could walk away — stop making the mortgage payments that consume a big part of their income. But defaulting would ruin their credit and have other negative consequences. So, she said, they'll keep paying and hoping for the best.

Unhappily for the rest of the country, that's not the end of the problem: The Hineses' financial bind will ripple throughout their community and the larger economy.

The real estate market depends on such homeowners being able to sell and move up; without them the trade-up market can't grow.

Meantime, the Hineses will keep delaying that new roof, depriving a local roofer of business. They're unlikely to redecorate or upgrade the kitchen either, as millions of families were doing before the recession — more potential losses for local businesses, not to mention the car dealers, clothing and consumer electronics stores and manufacturers of the products that the Hineses won't buy.

Weighed down by the huge debt on their house, they also will be a lot more cautious about how they use credit cards. Big family getaways in the summer? Forget it, Hines said.

Multiply such sentiments by millions across the country and that translates into lackluster private spending, which accounts for 70% of the American economy.

Are you ready for the 3 most important days of the year?

If you thought the last two days were wild, just wait until next week!
Arguably the three most important days of the year affecting the mortgage market happen the first week in November.

Tuesday, November 2	Mid-term elections—what will the results mean to the markets?
Wednesday, November 3	Fed meeting—you think you know what the Fed is going to do, but what will it mean to rates?
Friday, November 5	Jobs Report—more important than ever, what will the Jobs Report bring us?

The foreclosure machine grinds again

Don’t blink — with dizzying speed and (supposed) efficiency, Bank of America (BofA) has announced it will resume foreclosures in the 23 states it halted foreclosures in several weeks ago. The other 27 states subject to the foreclosure moratorium, announced by BofA last week and including California, will remain in limbo. [For more information on BofA’s nationwide foreclosure moratorium, see the October 2010 first tuesday article, BofA postpones organic economic recovery by halting foreclosures.]
The foreclosure “pause,” as BofA officials are now referring to it, allowed for a comprehensive judicial review of their foreclosure procedures which has revealed no evidence, according to BofA, of wrongdoing or malfeasance. BofA has pledged that the nationwide foreclosure freeze was not due to any indication of impropriety on their behalf, but rather it was a concerted effort to ensure its customers were being treated fairly.
The fact that BofA has resumed foreclosure processing in 23 states is being taken as a cue from the big bank that fears over another “too-big-to-fail” crisis are unfounded. BofA has pledged foreclosures will recommence throughout the rest of the country soon.
first tuesday take: Is this a sign the foreclosure mills at BofA have regained their operational footing? Or is it a window into just how off-kilter and spastic the banking giant really is? Of course, BofA would like us to believe the former — the negative equity California homeowners (read: soon-to-be renters) should simply overlook this brief hiatus in the determination of their fate. They have waited this long to receive their walking papers, what is a couple more weeks, rent-free nonetheless, while BofA “pauses” to ensure they are, at last, being “treated fairly?” [For more information on how the wounded housing market is affecting the rental market, see the July 2010 first tuesday article, Rentals: the future of real estate in California.]
BofA seems to be woefully unaware of the effect such administrative schizophrenia can have on the housing market and thus the economy as a whole. The individual homeowner who is underwater and has strategically defaulted may not mind if their foreclosure was paused. In fact, many were thankful for the momentary reprieve from the stress of preparing for their impending eviction, negative credit reporting and so on.
But while the homeowner waits to be released from his residential prison, and while BofA halts foreclosures and simultaneously insists nothing is wrong, the economy is grinding to a halt (again) along the seemingly never-ending plateau of an abortive checkmark recovery. [For more information on the abortive checkmark, see the November 2009 first tuesday article, Divining the future: the letters game.]
As the BofA foreclosure machine sputters back to life, we will have to wait and see what happens once all foreclosures, BofA’s and those handled by other banks, are resumed. We can quantify how much housing inventory remains in the shadows. We can anticipate the losses big banks will be forced to report once the huge backlog of home loans in default finally go to the trustee’s auction block. Unfortunately, consumer confidence is not quite so predictable. When the largest bank in the nation freezes all foreclosures in the name of consumer protection, one would hope they would have the good sense to carry on the charade long enough to make it believable.

Home Path Mortgage Offers Low-Cost Fannie Mae Bank Owned Foreclosure Homes

Fannie Mae’s Home Path Mortgage is a home buying program that offers incentives to individuals who buy bank owned foreclosures. The Home Path program allows buyers to purchase Fannie Mae homes with reduced down payments and closing costs, along with flexible mortgage terms. Other incentives include elimination of home appraisal fees and mortgage insurance.
The Home Path Mortgage program provides two financing options. The first option is similar to a conventional home loan and is available to individuals who purchase a Fannie Mae foreclosure home as their primary residence. The second option is Home Path renovation mortgage financing and provides additional funds to make light repairs. Both finance options require buyers to obtain funding through an approved lender.
Home Path properties are owned by Fannie Mae and obtained through repossession and forfeiture. Properties include single family homes, townhomes and individual condo units. Properties are sold “as is” and often require some level of renovation. Buyers should obtain a home inspection prior to signing closing contracts.
Under the Home Path program, buyers must provide a minimum 3-percent down payment; making this a good choice for buyers who do not have the necessary funds for conventional financing. A major perk is borrowers can utilize funds obtained from outside sources to meet the down payment requirement. FHA is the only other program that allows down payment assistance.
One option for obtaining down payment assistance grant money to buy bank owned foreclosure real estate is the Neighborhood Stabilization Program offered through the Department of Housing and Urban Development. Billions of dollars have been earmarked for NSP grants to help stabilize communities hit hard by foreclosure.
NSP grant money can be used to buy Fannie Mae foreclosures offered through the Home Path mortgage program. NSP funds are managed by a variety of nationwide partners. Home buyers will need to contact their state’s Neighborhood Stabilization Program manager. A list of NSP grant partners is provided at HUD.gov.
Buyers of Fannie Mae real estate must obtain bank prequalification before submitting their offer. Prequalification does not guarantee home loan financing will be approved. Instead, it is used to determine how much buyers can afford to borrow.
First time home buyers who purchase Home Path properties prior to April 30, 2010 qualify for the $8000 federal housing tax credit. Homeowners who have resided in their home for at least five years and purchase a Fannie Mae foreclosure home with a higher value can obtain a $6500 tax credit. Individuals should consult with a professional tax preparer to ensure they are entitled to home buying tax credits.
The Home Path mortgage program is also a good option for real estate investors to purchase discounted investment properties. Investors can apply for NSP grant money, but cannot take housing tax credits against purchased properties. Unless investors obtain an NSP grant, they must wait 15 days after the property is listed before making an offer.
Home Path properties are sold under the “first look” provision. Buyers who receive down payment assistance and grant money are given first dibs during the first 15 days. If no offers are presented, real estate investors can submit offers on up to five properties through a Fannie Mae broker.
It is important to note not all Fannie Mae homes are eligible for special financing. Only properties listed at the HomePath.com website qualify.

Top 6 Mortgage Mistakes

During the 2007-2009 financial crisis, the United States economy crumbled because of a problem with mortgage foreclosures. Borrowers all over the nation had trouble paying their mortgages. At the time, eight out of 10 borrowers were trying to refinance their mortgages. Even high end homeowners were having trouble with foreclosures. Why were so many citizens having trouble with their mortgages?

More from Investopedia: • 5 Steps to Attaining a Mortgage • Top 8 House-Hunting Mistakes • Financing For First-Time Homebuyers

Let's take a look at the biggest mortgage mistakes that homeowners make.
1. Adjustable Rate Mortgages
Adjustable rate mortgages seem like a homeowners dream. An adjustable rate mortgage starts you off with a low interest rate for the first two to five years. They allow you to buy a larger house than you can normally qualify for and have lower payments that you can afford. After two to five years the interest rate resets to a higher market rate. That's no problem because borrowers can just take the equity out of their homes and refinance to a lower rate once it resets.
[Click here to check home loan rates in your area.]
Well, it doesn't always work out that way. When housing prices drop, borrowers tend to find that they are unable to refinance their existing loans. This leaves many borrowers facing high mortgage payments that are two to three times their original payments. The dream of home ownership quickly becomes a nightmare.
2. No Down Payment
During the subprime crisis, many companies were offering borrowers no down payment loans to borrowers. The purpose of a down payment is twofold. First, it increases the amount of equity that you have in your home and reduces the amount of money that you owe on a home. Second, a down payment makes sure that you have some skin in the game. Borrowers that place down a large down payment are much more likely to try everything possible to make their mortgage payments since they do not want to lose their investment. Many borrowers who put little to nothing down on their homes find themselves upside down on their mortgage and end up just walking away. They owe more money than the home is worth. The more a borrower owes, the more likely they are to walk away.
3. Liar Loans
The phrase "liar loans" leaves a bad taste in your mouth. Liar loans were incredibly popular during the real estate boom prior to the subprime meltdown that began in 2007. Mortgage lenders were quick to hand them out and borrowers were quick to accept them. A liar loan is a loan that requires little to no documentation. Liar loans do not require verification. The loan is based on the borrower's stated income, stated assets and stated expenses.
They are called liar loans because borrowers have a tendency to lie and inflate their income so that they can buy a larger house. Some individuals that received a liar loan did not even have a job! The trouble starts once the buyer gets in the home. Since the mortgage payments have to be paid with actual income and not stated income, the borrower is unable to consistently make their mortgage payments. They fall behind on the payments and find themselves facing bankruptcy and foreclosure.
4. Reverse Mortgages
If you watch television, you have probably seen a reverse mortgage advertised as the solution to all of your income problems. Are reverse mortgages the godsend that people claim that they are? A reverse mortgage is a loan available to senior citizens age 62 and up that uses the equity out of your home to provide you with an income stream. The available equity is paid out to you in a steady stream of payments or in a lump sum like an annuity.
There are many drawbacks to getting a reverse mortgage. There are high upfront costs. Origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and miscellaneous fees can quickly eat up your equity. The borrower loses full ownership of their home. Since all of the equity will be gone from your home, the bank now owns the home. The family is only entitled to any equity that is left after all of the cash from the deceased's estate has been used to pay off the mortgage, fees, and interest. The family will have to try to work out an agreement with the bank and make mortgage payments to keep the family home.
5. Longer Amortization
You may have thought that 30 years was the longest time frame that you could get on a mortgage. Are you aware that some mortgage companies are offering loans that run 40 years now? Thirty five and forty year mortgages are slowly rising in popularity. They allow individuals to buy a larger house for much lower payments. A 40-year mortgage may make sense for a young 20-year-old who plans to stay in their home for the next 20 years but it doesn't make sense for a lot of people. The interest rate on a 40-year mortgage will be slightly higher than a 30 year. This amounts to a whole lot more interest over a 40-year time period, because banks aren't going to give borrowers 10 extra years to pay off their mortgage without making it up on the back end.
Borrowers will also have less equity in their homes. The bulk of payments for the first 10 to 20 years will primarily pay down interest making it nearly impossible for the borrower to move. Besides, do you really want to be making mortgage payments in your 70's?
[What It Takes to Get a Loan]
6. Exotic Mortgage Products
Some homeowners simply did not understand what they were getting themselves into. Lenders came up with all sorts of exotic products that made the dream of home ownership a reality. Products like interest only loans which can lower payments 20-30%. These loans let borrowers live in a home for a few years and only make interest payments. Name your payment loans let borrowers decide exactly how much they want to pay on their mortgage each month.
The catch is that a big balloon principal payment would come due after a certain time period. All of these products are known as negative amortization products. Instead of building up equity, borrowers are building negative equity. They are increasing the amount that they owe every month until their debt comes crashing down on them like a pile of bricks. Exotic mortgage products have led to many borrowers being underwater on their loans.
The Bottom Line
As you can clearly see, the road to home ownership is riddled with many traps. If you can avoid the traps that many borrowers fell into then you can keep yourself from financial ruin.

How Do Real Estate Commissions Work?

A real estate commission is a fee paid to a real estate agent, broker or realtor after a real estate transaction is complete. Real estate agents essentially work for free until they are paid this commission. Selling agents will host open houses and show interested buyers around the home, while buying agents will take their client to view the different homes that the buyer is interested in. Both agents will then work together to negotiate the final sale. The commission is their compensation for all their up-front work.
The seller of the property involved in the transaction usually pays the real estate commission. Real estate commission percentages can be tricky because commissions may vary greatly from office to office and region to region. The broker of any given real estate agency may set the commission fees at 5%, 6% or even 7% of the selling price to list any given property. If a participating agency sells the house, the listing agency may split the commission or the listing agency may take more.
By using the Multiple Listing Service (MLS), real estate agents can find out about commissions by taking a look at the BAC and SAC fields. The BAC field is designated as the "Buyer Agency Commission" and the SAC field is designated as the "Seller Agency Commission." If an agency charges an even 6% commission to sell any given property, it may spilt the commission fee with a participating agency. If this were the case, the fields would read "BAC 03" and "SAC 03." This means that the seller will pay a 3% commission to the selling agency. The other 3% will go to the listing agency.
Find out about your local real estate commission laws; click here to visit the Directory of U.S. and Canadian Real Estate Licensing Offices to locate your local office and learn more about how real estate commissions work in your area.

C.A.R. 2011 California Housing Market Forecast

CALIFORNIA ASSOCIATION OF REALTORS® releases its California Housing Market Forecast for 2011:
Small increases projected in both home sales and median home price
Multimedia:

• View video of the presentation  by C.A.R. Chief Economist Leslie Appleton-Young and Deputy Chief Economist Robert Kleinhenz.

LOS ANGELES (October) – A weaker-than-expected economic recovery will result in a projected decline in California home sales for 2010, although home sales are expected to edge up slightly in 2011, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) “2011 California Housing Market Forecast” released today. 
California home sales for 2010 are forecast to decline 10 percent from the 2009 sales figure of 546,500 homes sold.  Sales in 2011 are projected to increase a lackluster 2 percent to 502,000 units compared with 492,000 units (projected) in 2010.  After two consecutive years of record-setting price declines, the median home price in California will climb 11.5 percent in 2010 to $306,500 and increase another 2 percent in 2011 to $312,500, according to the forecast.
“California’s housing market will see small increases in both home sales and the median price in 2011 as the housing market and general economy struggle to find their sea legs,” said C.A.R. President Steve Goddard.  “The minor improvement in the housing market next year will be driven by the slow pace of recovery in the economy and modest job growth.  Distressed properties will figure prominently in the market next year, but we also expect to see discretionary sellers play a larger role,” he said.
“As the U.S. economy continues its tepid recovery, we’ll see some improvement in California’s economy,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures,” she said.
“The situation in the California housing market continues to be a tale of two housing markets,” said Goddard. The segment of the market under $500,000 has been driven by distressed sales, while higher-priced areas of the state have been constrained by restricted financing options, and increasingly have experienced an increase in the number of distressed properties.  Sales in the low end have been constrained by a lack of inventory, putting upward pressure on prices.  Multiple offers on lower-end homes have been very common, according to Goddard.
“A lean supply of available homes for sale will drive prices up at the low end, but larger inventories and limited, less attractive financing will cause continued softness at the high end,” said Appleton-Young.  “There’s some indication that lenders will accelerate the number of foreclosures coming on market, further adding to the housing supply, but we do not anticipate that lenders will flood the market with distressed properties,” she said.
“The wild cards for 2011 include federal housing policies, actions of underwater homeowners, and the strength of the economic recovery,” said Appleton-Young.  “What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy,” she said.
An expanded forecast presentation will be presented Wednesday afternoon during the CALIFORNIA REALTOR® EXPO 2010 (http://expo.car.org/), running from Oct. 5-7 at the Anaheim Convention Center in Anaheim, Calif.  The trade show attracts nearly 7,000 attendees and is the largest state real estate trade show in the nation. 
Don’t miss “2010 Econ Panel:  The Future of Real Estate Finance and Your Market in 2011” during CALIFORNIA REALTOR® EXPO 2010.  C.A.R. Vice President and Chief Economist Leslie Appleton-Young will lead a panel of renowned economists as the experts share their predictions on what the changing economy means for real estate.  Panelists include: Richard Green, professor and director of the USC Lusk Center for Real Estate; John Karevoll, housing analyst at Dataquick Information Systems; and Michael LaCour-Little, professor and director of the California State University, Fullerton Real Estate and Land Use Institute.  The panel is scheduled to be held Thursday, Oct. 7, from 2 p.m. – 3:30 p.m. at the Anaheim Convention Center.
2011 FORECAST FACT SHEET

	2005	2006	2007	2008	2009	2010f	2011f
SFH Resales (000s)	625.0	477.5	346.9	439.8	546.5	492.0	502.0
% Change	0.03%	-23.6%	-27.3%	26.8%	24.3%	-10.0%	2.0%
Median Price ($000s)	$522.7	$556.4	$560.3	$346.4	$275.0	$306.5	$312.5
% Change	16.0%	6.5%	0.7%	-38.2%	-20.6%	11.5%	2.0%
30-Yr FRM	5.9%	6.4%	6.3%	6.0%	5.1%	4.7%	5.1%
1-Yr ARM	4.5%	5.5%	5.6%	5.2%	4.7%	3.9%	4.1%

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.