What do sex offenders and owners of vacant property have in common?
UPDATE: March 8, 2010 – I found out today the bill that was actually perfected last Friday was a floor substitute…Unfortunately the changes made to the bill were minor- they changed the public data base so that you have to enter a property address in order to look up the owners personal information (including phone number and email address) and they changed the wording to no longer make real estate agents and property managers responsible for property they don’t own. So basically, just a little window dressing to try to appease the REALTORS(R)…The bill is still a bad….
UPDATE: March 5, 2010–In spite of opposition to the bill by the St. Louis Association of REALTORS and others, the Board of Alderman perfected the bill today by a vote of 16-7. The next steip is for the bill to get final approval by the Board of Alderman on March 12th. Hopefully this can still be stopped.
Well, if Kacie Starr Triplett, Alderwoman for the 6th ward of the City of St. Louis, has her way, then both will have their private information listed in a public, online database for the whole world to see. The big difference is one such group is made up of felons convicted of some of the most despicable crimes short of murder one could commit, and the other group is made up of a group of property owners that own a property that has not been occupied for 6 months and could have as little as one building code violation. Hmm…
Triplett has sponsored a bill, Board Bill No. 322, which, if passed by the board of Alderman, would establish a “St. Louis Vacant Building Online Database for public access.” The bill states “the property owner shall provide the property owner’s street address, phone number and email address.” So, in a nutshell, if you are a property owner in the City of St. Louis and fall into this category, your personal contact information, including your phone number and email address, will be in a public database maintained by the City of St. Louis for all to see, just like convicted sex offenders. Oh wait, no, now that I am reviewing the sex offender registry they only reveal the address, they don’t even have to give a phone number and email address! Not to mention the sex offenders ended up in that situation after being convicted, you ended up there just by owning property (and having as little as 1 outstanding building code violation).
Thinking you’ll just say NO?
So you say “it’s none of their business and I just won’t give them the info”…..whoa, not so fast, let me quote the penalty in Tripletts bill for failure to provide this personal information:
“any person found to be in violation of provision of Section Six of this ordinance (that is the section requiring the personal info for the data base) shall be subject to a fine of not more than five hundred dollars ($500.00) or to a term of imprisonment of not more than ninety days (90) or to both a fine and imprisonment.”
Did you catch the part about prison? Yep, refuse to give them your unlisted phone number or email address and risk 90 days in city jail…fun. What happens if you don’t have an email address? I’m not sure…
There’s more….Lose your property over $400
If you fail to pay the fee for registering your property, which is $200 for every six-month period it is vacant, after one-year the fee becomes a lien and the city can foreclose. So, you could lose your property over $400, just like someone in the city did in the past two months under the current vacant property ordinance (current law does not have the public database).
There’s still more…Are you a property manager or maintenance person? Read this
Under the “Vacant Building Maintenance” heading, the bill states:
“The owner of any building that has become vacant, and any person maintaining, operating or collecting rent for any building that has been determined vacant shall, within thirty (30) days, do the following:
1. Enclose and secure the building, as defined under the St. Louis City Revised Code Chapter 25.01.030, Section 118.3.1 All doors must be properly secured and windows on all floors of the building be properly secured;
2. Maintain the building in a secure and closed condition until the building is again occupied or until repair or completion of the building has been undertaken.”
Wanna guess what the penalty is for failure to comply with the above? You probably guessed same penalty as for failure to give the personal information? Close….
“any person found to be in violation of provision of Section Seven of this ordinance shall be subject to a fine of not more than five hundred dollars ($500.00) or to a term of imprisonment of not more than ninety days (90) or to both a fine and imprisonment.
Every day that a violation continues shall constitute a seperate and distinct offense“
Did you catch the “every day” part? So, lets just say you are a property manager, or I guess maintenance man (I guess that is what she is referring to when she names people “maintaining” the property) or an owner and you have a vacant unit and fail, for one reason or another to properly secure the building in compliance with the codes (which is rather subjective, of course) for say 30 days; what maximum penalties are you facing under this new ordinance? Let’s do the math:
Fine, $500 x 30 days = $15,000 total fine
Imprisonment, 90 days x 30 days=2,700 days imprisonment (7.5 years)
Is it just me, or does this seem harsh?
So what’s wrong with all this?
I know my diatribe is getting lengthy so I’m going to wrap things up with what I see as issues with this ordinance in bullet points below:
Invitation for theft – One problem property owners face in the city, particularly with vacant buildings, is theft and vandalism. I have had many airconditioning units stolen just for the copper coils inside, plumbing ripped out of houses for the copper as well. What more could a theif want? An online database that shows him every vacant buidling in the city? Stealing copper will be almost as easy as shopping at Wal-Mart.
Privacy issues – I don’t think most poeple would want their phone number and email address put online for anyone to access.
Lack of notice/due process– I’m very concerned about the city’s ability to turn this fee into a lien and foreclose on the property.
FORGET GETTING A LOAN ON AN INVESTMENT PROPERTY – In my opinion, if this bill passes, I think it will be hard, if not IMPOSSIBLE, to get financing on an investment property in the city…reason being, Tripletts bill says after fees become delinquent for a year they become a lien and subject to foreclosure “in the same manner as delinquent real property taxes“… I’m not sure how a court is going to interpret this, but in the City a sale for back property taxes wipes out ALL liens, even senior liens (such as first deeds of trust)…by the wording of her bill I think the case could be made that the foreclosure on the liens wipes out senior liens as well….if that is the case lenders are going to be very concerned about lending money on a building that may end up being subject to vacant property registration…
I need to say, I am not defending derelict buildings or irresponsible property owners, I just don’t feel this is the way to deal with them. Ordinances like this, in my opinion, assume you are guilty and treat you that way, plus trample on your rights.
If you don’t own property in the City you may think this doesn’t affect you, but that may be temporary. Municipalities copy what is done in other municipalities all the time. If this ordinance passes in the City of St. Louis I promise you it will appear in other places as well. Perhaps where you live or own property.
In addition, speaking from experience, cities don’t usually stop with just one ordinance once they have forged new territory. If the city gets this ordinance through and deems it a success in their eyes, you can bet they will start looking at other “problem areas” they can attack in the same way. Many cities see rental property as a problem and claim tenants cause more calls to police, create more problems than homeowners, etc. What if tenants are the next target? How about a public data base showing the tenants name, phone number and email address? Think about it. Where does it stop?
Tripletts bill has already been through a committee and is moving forward. If you would like to voice your opinion on it I would suggest you contact her, or your alderman if you live in the city or perhaps Lewis Reed, the President of the Board of Alderman. Their contact information is below:
According to a report issued this morning by the the Federal Housing Finance Agency (FHFA) St. Louis area home prices increased by 1.32 percent in 2009. Granted that’s not much but, hey, after what we’ve seen the last couple of years in the housing market I think this is very good news.
This information comes for the FHFA’s purchase-only price index which is based upon repeat sales of the same single-family properties therefore making it a much more accurate barometer of the market than just looking at median prices of homes sold as many reports do. In addition, since FHFA obtains the sales data from mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional mortgage transactions (more than 5 million repeat transactions) which represents probably the most comprehensive sampling of data available.
One thing to remember though, is Fannie Mae loan limits are $417,000, so the data compiled does not reflect what is happening in the upper end of the market with loans in excess of $417,000 however here in St. Louis that makes up a very small part of the market . In 2009 there were 23,565 homes and condos sold in the St. Louis metro area and only 808 of them (3.4 percent) sold for $500,000 or above.
Other highlights from the report:
St. Louis ranked 8th of the 25 largest metro areas in terms of price appreciation for 1 year. Washington-Arlington-Alexandria topped the list at 10.55 percent. Miami-Miami Beach-Kendall, FL was at the bottom of the list iwth -12.86 percent
For the 4th quarter of 2009 St. Louis home prices increased 0.83 percent.
St. Louis home prices have appreciated 3.91 percent in the past 5 years, coming in 7th of the 25 largest metros. Houston-Sugar Land-Baytown, TX came in 1st at 21.63 percent and Riverside-San Bernardino-Ontario, CA came in last at -37.18 percent.
Since 1991 St. Louis home prices have increased 99.17 percent, coming in at 14th place of the 25 largest metros. Denver-Aurora-Broomfield, CO had the highest appreciation in that period at 177.80 percent and Warren-Troy-Farmington Hills, MI came in last at 30.99 percent.
So there you go….some good news from me for a change. :)
When considering historically low interest rates, competitive home values along with the $8,000 First-Time Homebuyer and $6,500 Repeat Homebuyer Tax Credits, potential homebuyers still have a great opportunity.
THE TIME TO ACT IS NOW.
The Federal Reserve indicates it will stop buying mortgage-backed securities toward the end of the first quarter. Most mortgage experts believe that mortgage interest rates will rise when mortgages go off “Fed support” as private investors require higher rates to compensate for the risk.
The deadline for the First Time/Repeat Homebuyer Tax Credits is an executed contract by April 30, 2010 with a closing no later than June 30, 2010.
Contact your lender to review your options and prospects.
St. Louis Mortgage Rates – February 24, 2009 *
30-year fixed-rate mortgage 5.00% no points
15-year fixed-rate mortgage 4.25% no points
5/1 adjustable rate mortgage 3.75% no points
3/1 adjustable rate mortgage 3.750% no points
FHA/VA 30-year fixed rate mortgage 5.250%
Jumbo 5/1 ARM 4.125% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
*Note- The above rates are based upon a typical sale price of $187,500 with a 20% percent down payment leaving a loan amount of $150,000 to a borrower with a 720 credit score for a loan with no discount points charged. Rates and terms will vary depending upon loan amount, home value, credit and income of borrower.
This information is provided by this author and this site for informative purposes only and is not warranted or guarteed in any way.
Over Fifteen Percent of Missouri Borrowers are Underwater-Another 5.6 Percent Are Almost Underwater
Dennis Norman
According to a report released today by First American CoreLogic more than 11.3 million U.S. mortgages, or 24 percent of all mortgaged properties, are in a negative equity position meaning the borrowers owe more on their mortgage than their home is worth as of December 31, 2009.
There were approximately 600,000 more borrowers underwater on December 31, 2009 than just three months earlier. In addition, there were an additional 2.3 million mortgages approaching negative equity at the end of last year .
Together, negative equity and near-negative equity mortgages account for nearly 29 percent of all residential properties with a mortgage nationwide.
Like foreclosures, borrowers with negative equity are concentrated in five states: Nevada, which had the highest percentage of negative equity with 70 percent of all of the states mortgaged properties underwater, followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent). Among these five states the average negative equity is 42 percent of the mortgages compared with an average of 15 percent for the remaining 45 states.
Other highlights from the report are:
The states with the highest percentage increases in negative equity during 4th quarter 2009 were Nevada, Georgia and Arizona.
The rise in negative equity is closely tied to increases in foreclosures and is a major factor in changing the behavior of homeowners. According to the report, once a homeowner has over 25 percent negative equity or the mortgage balance is $70,000 higher than the current property value, homeowners begin to default with the same propensity as investors. In other words, they stop looking at their home from an emotional standpoint and start treating it like a bad investment.
The average negative equity in 4th quarter was $70,700, up from $69,700 in 3rd quarter.
Of the over 47 million homeowners with a mortgage, the average loan to value ratio (LTV) is 70 percent. More than 23 million, or 49 percent, of all homeowners with a mortgage have at least 25 percent equity in their home, and over 12 million have at least 50 percent equity in their homes.
Even though the housing market is showing signs of stabilizing in many areas, the number of people underwater on their mortgages is something that gives me great concern. As shown in the corelogic report, the average amount of negative equity has now broken the $70,000 threshold where homeowners are more easy to succumb to walking away. As borrowers due this, we will see the mortgage delinquency rates, which are already at record highs, continue at a record pace, and we will see the shocking foreclosure rate continue for some time. This will continue to put downward pressure on the housing market making an actual recovery that much more difficult.
I hate to sound gloom and doom, but I think unless some good things start happening (a whole lot less unemployment for one) this will be reality.
American homeowners’ confidence in their own homes’ values falls to lowest level in almost two years
According to the Zillow 4th quarter, 2009 Homeowner Confidence Survey, American’s aren’t feeling so good about the value of their homes, and, in fact, just one in five (20 percent) believe their own homes’ values increased during 2009. What’s interesting here is, according to Zillow, 28 percent of all homes increased in value, meaning that almost a third of the homeowners with homes that increased in value don’t think so.
Even though the confidence level in this report is the lowest in seven quarters, homeowners continue to be optimistic about the future with 38 percent believing their homes’ values will increase in the next six months.
Other highlights from the survey:
For the first time since the survey was first done in the 2nd quarter of 2008, homeowners were overly cynical about the values of their own homes, with a Misperception Index of -2 (an INdex of 0 would indicate homeowner perceptions are aligned with reality; a negative index indicates they are over cynical)
Home are more optimistic about the future: Fewer than one in six (14 percent) believe their own homes’ value will decrease in the next six months.
Homeowners in the Northeast and West were the most cynical about the performance of their own homes’ values in the last year, with Misperception Indexes of -14 and -5, respectively.
Radarlogic Housing Market Report Shows First November-December Increase in Home Prices Since 2004 For the US – However It shows a Decrease For December for St. Louis –
When I received the Housing Market Report from Radarlogic, I was happy to see some good news; home prices increased in December from November and a 44 percent increase in the number of homes sold in December versus a year before. Unfortunately those numbers were based upon Radarlogic‘s RPX Composite Price, which tracks home prices in 25 major metropolitan areas (including St. Louis) and when I drilled down to the St. Louis Housing Numbers they were not as encouraging.
The report shows St. Louis home prices decreased from November to December by 6.9 percent, as opposed to the increase of 0.2 percent for the 25 metro areas combined. Housing transactions in December 2009 in St Louis increased 5.5 percent from a year ago, however this is far less than the 44 percent increase in transactions for the 25 city composite. From November to December St Louis saw a decrease of 54.9 percent in the number of housing transactions, a much larger decline than the 11.0 percent decline for the 25 city composite.
Radarlogic’s report bases it’s home price data on the price per foot homes sell for versus the sales price of the home. I think this is a more “apples to apples” approach and results in more accurate data than looking at median home prices which could be affected by an increase in activity in a particular price range of home. Having said that I still wanted to check their data against data I compiled from the MLS. Here are my findings from MLS data:
The median price of homes and condos sold in St. Louis in November 2009 was $131,500. For December the median price was $125,000 for a decline of 4.9 percent. Not far off from the 6.9 percent decrease in the Radarlogic report.
There were 1,011 homes and condos sold in St. Louis in December 2009, a decrease of 2.97 percent from a year ago. The Radarlogic report showed an increase of 5.5 percent so there is some disparity here.
December 2009’s home and condo sales of 1,011 was a decrease of 33.8 percent from November 2009 sales of 1,527 units. This is a smaller decrease than the 54.9 percent decrease shown in the Radarlogic report.
Overall I think the research I did supports the trend shown in the Radarlogic report for the St. Louis housing market; some softness in prices and a surge of home sales in November from the tax credits.
However in spite of a tough and demanding economic market, Paramount Mortgagethis week celebrated it’s 40 year anniversary!
“Expect Excellence” has been our corporate motto and the driving force in our philosophy of providing exemplary customer service,” states H. John Frank, Jr., President of Paramount Mortgage Company. “We have never forgotten that this is a people business and we treat our clients with respect. We take the time to get to know their home purchasing goals and communicate with them throughout the entire mortgage process,” continued Frank. The company’s customer-first attitude is a main factor in Paramount’s sustained operation over the past 40 years since 1970.
Frank cites his company’s corporate approach as what generates the repeat business that has fueled their growth. Frank adds that “Paramount has continued to expand nationwide since 2008 from St. Louis to Seattle, adding offices in Seattle, Chicago and Northern Idaho.
St. Louis Mortgage Rates – February 17, 2009 *
30-year fixed-rate mortgage 5.00% no points
15-year fixed-rate mortgage 4.25% no points
5/1 adjustable rate mortgage 3.75% no points
3/1 adjustable rate mortgage 3.750% no points
FHA/VA 30-year fixed rate mortgage 5.250%
Jumbo 5/1 ARM 4.125% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
*Note- The above rates are based upon a typical sale price of $187,500 with a 20% percent down payment leaving a loan amount of $150,000 to a borrower with a 720 credit score for a loan with no discount points charged. Rates and terms will vary depending upon loan amount, home value, credit and income of borrower.
This information is provided by this author and this site for informative purposes only and is not warranted or guarteed in any way.
Deceleration in Rise of Mortgage Delinquencies Short Lived
Back in July, 2009 when speaking in North Carolina President Barack Obama announced “we may be seeing the beginning of the end of the recession“. My thoughts then were that was very optimistic and I didn’t agree (for whatever that is worth). Since then some economists have announced the recession is officially over. Technically based upon a few bits of data the recession may be over, but for us real people that are actually living and functioning in this economy I don’t think it is over; at least not for the one market I know best, the housing market.
Today, TransUnion had more sobering news for the real estate market; the mortgage loan delinquency rate (the ratio of borrowers 60 or more days past due) increased for the 12th straight quarter, hitting an all-time national average high of 6.89 percent for the fourth quarter of 2009. The fourth quarter marks the first time the mortgage delinquency rate increase did not decelaerate after doing so in the three prior quarters.
Highlights from the fourth quarter report:
Mortgage delinquency rates continued to be highest in Nevada (16.19 percent) and Florida (14.93 percent)
Mortgage delinquency rates were lowest in North Dakota (1.84 percent), South Dakota (2.46 percent) and Alaska (2.84 percent)
Areas with the greatest growth in delinquency rates from the previous quarter were the District of Columbia (+20.2 percent), Louisiana (+17.7 percent) and Delaware (+14.8 percent).
No state showed in a decrease in mortgage delinquency rates from third quarter.
Average national mortgage debt per borrower increased (0.29 percent) to $193,690 from $193,121 in 3rd quarter.
The area with the highest average mortgage debt per borrower was the District of Columbia at $372,869, followed by California at $352,688 and Hawaii at $317,599.
The lowest average mortgage debt per borrower was in West Virginia at $99,028.
The Forecast for 2010 is not pretty
TransUnion is forecasting the 60-day mortgage delinquency rate to “peak between7.5 and 8 percent over the course of 2010.” So we could be looking at an increase of anywhere from 8.8 percent to 16 percent in mortgage delinquencies from the record level they hit in the 4th quarter of 2009.
Ugh…I’m glad the recession is over, think how bad it would be if it wasn’t.
Last week a friend emailed me a link to a video titled “The Indymac Slap in Our Face” that was created by Think Big Work Small. I watched the video which gave a recap of the failure of Indymac bank back resulting in it’s seizure by the FDIC in July, 2008, and the ultimate sale by the FDIC of Indymac Bank to One West Bank in March, 2009.
According to the video, One West Bank received a cushy, “sweetheart deal” and implied it was related to the fact that the owners of One West Bank include Goldman Sachs VP, Steven Mnuchin, billionaires George Soros and John Paulsen, and that “it’s good to have friends in high places.” Here is a recap of some of the “facts” of the deal they gave on the video:
One West Bank paid the FDIC 70 percent of the principal balance of all current residential loans
One West Bank paid the FDIC 58 percent of the principal balance of all HELOC’s (Home Equity Lines of Credit)
The FDIC agreed to cover 80 – 95 percent of One West’s loss on an Indymac loan as a result of a short sale or foreclosure.
The kicker is, according to the video, is that the “loss” is computed based upon the original loan amount and notthe amount One West paid for the loan.
On the video the hosts give an example of an “actual scenario” showing how the deal worked, below is a recap:
One West Bank approved a short-sale of $241,000 on one of the Indymac loans it purchased from the FDIC (the total balance owed by the borrower at the time was $485,200).
Based upon the terms of the loss sharing agreement, One West “lost” $244,200 on this transaction, 80 percent of which ($195,360) was paid to One West by the FDIC.
So, One West received $241,000 from the short sale and $195,360 from the FDIC for a total of $436,360 on a loan they bought from the FDIC for $334,600, thereby resulting in a profit of $101,760 on the loan to One West.
One last kicker, the video claims, in addition to making over $100,000 on the loan, since the house was sold for less than what the borrower owed, One West also made the borrower sign a promissory note for $75,000 of the short-fall.
Below is a link to the video if you want to watch it for yourself.
The video got me pretty fired up like I imagine it did most people that saw it. Afterall, our federal government is running up debt faster than ever before, the FDIC has had to take over a record number of banks in the past year and now a sweetheart deal for people that are “connected.” OK, I’ll admit it, I was a little jealous….a 30 percent profit, guaranted by the FDIC? And all I have to do is discourage borrowers from doing loan modifications and force short-sales and foreclosures? Easier than taking candy from a baby, huh?
Hmm….wait a minute though, the skeptic in me (especially when it comes to anything distributed via email) made me wonder if the video was accurate or was it misunderstanding the facts, taking facts out of context or simply just wrong? To the credit of Think Big Work Small they did have links on their site to the loss-sharing agreement they were referencing.
Following are some highlights from the FDIC “Fact Sheet” on the sale of IndyMac:
The FDIC entered into a letter of internt to sell New IndyMac to IMB HoldCo, LLC, a thrift holding company controlled by IMB Management Holdings, LOP for approximately $13.9 billion. IMB holdCo is owned by a consortium of private equity investors led by Steven T. Mnuchin of Dune Capital Management LP.
The FDIC has agreed to share losses on a portfolio of qualifying loans with New IndyMac assuming the first 20 percent of losses, after which the FDIC will share losses 80/20 for the next 10 percent and 95/5 thereafter.
Under a participation structure on approximately $2 billion portfolio of construction and other loans, the FDIC will receive a majority of all cash flows generated.
When the transaction is closed, IMB HoldCo will put $1.3 billion in cash in New IndyMac to capitalize it.
In an overview of the Consortium it does identify “Paulson & Co” as a member as well as “SSP Offshore LLC”, which is managed by Soros Fund Management.
Just about the time I finished researching everything for this article I received a press release from the FDIC in response to the video which stated “It is unfortunate but necessary to respond to the blatantly false claims in a web video that is being circulated about the loss-sharing agreement between the FDIC and One West Bank.” The press release goes on to give these “facts” about the deal:
One West has “not been paid one penny by the FDIC” in loss-share claims.
The loss-shre agreement is limited to 7 percent of the total assets that One West services.
One West must first take more than $2.5 billion in losses before it can make a loss-share claim on owned assets.
In order to be paid through loss share, One West must have adhered to the Home Affordable Modification Plan (HAMP).
The last paragraph starts with “this video has no credibility.”
My Analysis
Before I get into this, I need to point out that while I have reviewed the sale agreement between the FDIC and One West as well as the loss-sharing agreement, watched the video above and read the FDIC’s press release, this is complicated stuff and not easy to understand. However, I think I have my arms around the deal somewhat so the following is my best guess analysis of the IndyMac deal with regard to the loss-sharing provision:
The FDIC says the loss sharing agreement only applies to 7 percent of the IndyMac Loans serviced by One West. It appears there is $157.7 billion in loans serviced, 7 percent of that amount is about $11 billion. So my guess is the loss-share applies to about $11 billion worth of loans.
One West agreed to a “First Loss Amount” of 20 percent of the shared-loss loans. The attachment for this was blank but the FDIC’s press release indicates this amount is $2.5 Billion. If that is the case then the total amount of loans the loss-share provision applies to is $12.5 billion. Obviously there is a $1.5 billion discrepancy between my calculation above and here (what’s $1.5 billion among friends?) but I’m going to go with the $12.5 billion because the amount of loans serviced I referenced may have been adusted at closing.
One West purchased the $12.5 billion in loans covered by the loss-sharing agreement for less than$8.75 billion. I say “less than” $8.75 billion as that is 70 percent of the loan amount which represents the amount One-West paid for residential loans that were current. The amount paid for current HELOC’s was only 58 percent and the price for delinquent mortgages went as low as 55 percent and as low as 37.75 percent for delinquent HELOC’s. Therefore I would assume the actual price paid by One-West was less than the $8.75 billion.
Once One West has covered $2.5 billion in losses, then the FDIC starts covering 80 percent of the losses up to a threshold at which time the FDIC covers 95 percent of the losses. Figuring out the threshold was a little trickier…I see a reference to 30 percent of the total loans covered by the loss-share so I’m going to use that which works out to $3.75 billion.
Now let’s figure the profit One West stands to make on the loans covered by the Loss-Share agreement;
If all the borrowers would pay off their loans in full, not less than $3.75 billion (not likely though that all borrowers will pay off in full).
Let’s be real pessimistic and look at the “worst-case” scenario: Lets say 100 percent of the loans bought by One West (covered by the loss-share) go bad and have to be short-sales or foreclosures at a loss. For the sake of conversation lets say the losses equal 40 percent of the loan amount, or $5 billion ($12.5 billion times 40 percent).
One West would have to cover the first $2.5 billion at which time the 80/20 rule would kick in for the next $1.25 billion in losses resulting in One West recovering $1.0 billion of those losses from the FDIC. Then for the next $1.25 billion ($3.75 to $5 billion) One West would recover 95 percent of the loss fro the FDIC or $1.1875 billion.
Recap: Of the $12.5 billion in loans, under the scenario above, One West would have realized $7.5 billion from foreclosures or short sales (60 percent of the debt) and would have recovered $2.1875 billion from the FDIC of the $5 billion in losses, for a total to One West of $9.6875 billion for loans they paid not more than $8.75 billion for a profit of a little less than $1 billion.
Keep in mind, my analysis above is based somewhat on fact and some on speculation and my “profit” scenario is based purely on speculation and pretty negative assumptions as to loan losses. This coupled with the fact that, as I stated above, One West probably bought the loans for less than I indicated, probably makes this a better deal with more than the $1 billion profit at the end of the day.
So is is a sweetheart deal or not? You be the judge…
One thing to keep in mind is the investors only put $1.3 billion cash into the deal to buy IndyMac, and they got a lot more than just the loans covered by the loss-sharing agreement. I’m thinking it’s a pretty good deal and one I probably would have jumped on…well, if I had $1.3 billion sitting around doing nothing…
Valentine’s Day is a time for love…Are you feeling left out because you haven’t found Mr or Mrs Right?
Maybe you aren’t looking in the right places…. have you tried hanging out in the laundry room of Apartment complexes?
All right, I know what you are wondering, what does this have to do with real estate and why am I writing about it? Actually I couldn’t resist….I guess I’m in the Valentine spirit, plus I was intrigued when I was sent the results of a survey done by Apartments.com concerning “Renter Romances in the Apartment Community.”
So here are the results from the more than 900 renters Apartments.com surveyed about “Renter Romances“:
53 percent said they have never had a romantic relationship with their roommate or neighbor living in the same apartment community.
32 percent said they have had such relationships
21 percent have made those relationships last anywhere from a few months to over a year
3 percent ended up engaged or married
The most popular meeting spots are the pool and laundry room
Other popular places for encounters included resident social functions, hallways and to and from the parking lot
40 percent said they would not object to a relationship with their roommate or neighbor.
Nearly 45 percent said they believe in “love at first sight”
OK, now the juicy stuff :)
nearly 10 percent said they always kiss on the first date
38 percent consider kissing on the first date
more than 35 percent said it depends on how the date is going
St. Louis ended 2009 With The Highest Foreclosure Rate and Mortgage Delinquency Rates On Record For the St. Louis Area
According to date from First American CoreLogic, St Louis finished 2009 with 1.43 percent of the homes in St. Louis with a mortgage in some stage of the foreclosure process and 5.73 percent of the mortgages in St. Louis seriously delinquent (90+ days past due).
The St. Louis area has seen increases in the foreclosure rate every month since August, 2008 and the the December 2009 rate is the highest rate recorded since First American CoreLogic began tracking the data. For comparison purposes, back in January of 2005 the foreclosure rate was 0.48%, or roughly one-third of the current rate.
The St. Louis area has seen increases in the seriously delinquent mortgage rate as well every month since May, 2008, and the December 2009 is the highest rate recorded since First American CoreLogic began tracking the data. For comparison purposes, back in January of 2005 the seriously delinquent mortgage rate was 1.80%, a little under one-third of the current rate.
So even though the St Louis real estate market does appear to be showing signs that we may have bottomed out, I don’t think we can rest easy or say we the market is on the road to recovery until we see the foreclosure and mortgage delinquency rates decline significantly. Oh yeah, lower unemployment would help too.
Big Losses Are Forecast For Commercial Real Estate and Expected to Crush Some Community Banks-Can the Housing Market Avoid the Fallout?
This morning the Congressional Oversight Panel issued a report, “Commercial Real Estate Losses and the Risk to Financial Stability” which expressed concerns about coming losses in Commercial Real Estate and also described how these losses could affect nearly everyone.
The report states the panel “is deeply concerned that a wave of commercial real estate loan losses over the next four years could jeopardize the stability of many banks, particularly community banks, and prolong an already painful recession.”
According to the panel, there are $1.4 trillion in commercial real estate (CRE) loans that were made in the last decade that will require refinancing in 2011 through 2014 and “nearly half (of the loans) are at present underwater,” meaning the borrower owes more o the loan than the property is worth. The concern is that “even borrowers who own profitable properties may be unable to refinance their loans as they face tightened underwriting standards, increased demands for additional investment by borrowers, and restricted credit.”
The commercial real estate crisis is not expected to bring down any of the largest banks however community banks face “the greatest risk of insolvency due to mounting commercial real estate loans losses” according to the report.
Think this won’t affect you if you are not an investor in commerical real estate or a banker? Think again…According to the panel “a significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American.” When commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities. Because community banks play a critical role in financing the small businesses that could help the American economy create new jobs, their widespread failure could disrupt local communities, undermine the economic recovery and extend an already painful recession.
An analysis of the St. Louis commercial real estate market by the National Association of REALTORS(R) does not paint a real pretty picture. As you can see from the charts below vacancies have been rising in all four types of commercial property, absorption rates have been negative, and both are forecast to stay that way with the exception of the retail market which is projected to show improvement in vacancies and absorption this year.
The newly expanded first-time homebuyer and repeat homebuyer tax credit was signed into law a few months ago, but many married, unmarried, or soon to be married tax filers, are confused about claiming these credits. Understandably so. There are numerous scenarios that can come up, e.g. “I am a long-time principal homeowner but my spouse has lived there for only 3 years. Can we qualify for the long-time homeowner’s credit if we purchase a new principal residence?” Marcy Stolle, Sr. Mortgage Banker at Paramount Mortgage Company recommends to her clients and prospects to “make sure” and consult with their tax professional or check with the IRS if they are not clear about their eligibility.
The IRS website is very helpful and addresses these questions and various scenarios.
There’s not much time left. If you are seriously considering a home purchase, April 1st is coming fast.
St. Louis Mortgage Rates – February 2, 2009 *
30-year fixed-rate mortgage 5.00% no points
15-year fixed-rate mortgage 4.375% no points
5/1 adjustable rate mortgage 3.875% no points
3/1 adjustable rate mortgage 3.750% no points
FHA/VA 30-year fixed rate mortgage 5.250%
Jumbo 5/1 ARM 4.125% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
*Note- The above rates are based upon a typical sale price of $187,500 with a 20% percent down payment leaving a loan amount of $150,000 to a borrower with a 720 credit score for a loan with no discount points charged. Rates and terms will vary depending upon loan amount, home value, credit and income of borrower.
This information is provided by this author and this site for informative purposes only and is not warranted or guarteed in any way.
The case involves Mark Scatizzi, a local REALTOR® who, after listing a home for sale at 1027 Addision, in the City of Bellefontaine Neighbors, advertised the property for sale and posted a “for sale” sign in the window of the property, all without first applying for an inspection of the home by Bellefontaine Neighbors. The City then charged Scatizzi by information in municipal court with two ordinance violations, the first being failure to have the property inspected and obtain a certificate of compliance from the City prior to marketing theproperty for sale, and the second being for displaying a “for-sale” sign in the window, again without obtaining the inspection first. Ultimately one charge was dismissed and the lower court ruled in favor of the City on the remaining one and fined Scattizi $100. Scattizi appealed the decision and the Appellant Court just reversed the lower courts ruling.
What Mark Scatizzi had faced with the City of Bellefontaine was something that many of us St Louis REALTORS® have to deal with daily; local ordinances that are passed that either affect owner’s property rights, impede an owner’s ability to sell a property or in some cases discourage ownership of rental property. In the case of Bellefontaine Neighbors, the city has in their property maintenance code the following requirement:
(a) It shall be unlawful for the owner or lessor of any property subject to the provisions of this code, or their agent, to advertise in any way, or to list with a real estate agent or other broker, such property for the purpose of selling, leasing, renting or otherwise transferring its ownership or possession, without first applying for the issuance of a Certificate of Compliance by the code official.
In his appeal Scatizzi stated that he felt this ordinance was unconstitutional and limited his right to free speech, below is an excerpt from the decision with the comments on this claim by Judge Clifford Ahrens who wrote the opinion of the appellant court:
In his first point, Defendant asserts that the trial court erred in enforcing section 112.4(a) of ordinance 2057 because it violates his right to free speech, his right to contract, and his right against unreasonable search and seizure.
3 Regarding speech, Defendant contends specifically that, by prohibiting an owner or agent from advertising property without first applying for a certificate of compliance, section 112.4(a) places an unconstitutional restriction on commercial speech. We agree.
Scatizzi also claimed that the Bellefontaine ordinance violation a Missouri State Law (67.317 RSMo) that was passed back in 1984 that states “No political subdivision of this state shall enact or enforce any ordinance which forbids or restricts the right of any owner of an interest in real property or his agent from displaying on the property a sign of reasonable dimensions, as may be determined by local ordinance, advertising:”.
The appellant court agreed with Scatizzi on this point as well addressing as follows:
In his second point, Defendant asserts that the trial court erred in not finding that section 112.4(a) of ordinance 2057 violates section 67.317 RSMo, which prohibits municipalities from restricting the right of homeowners and their agents to erect signs advertising real property for sale except as to sign size….
Superimposing the plain language of section 112.4(a) of ordinance 2057 over that of section 67.317 RSMo compels the conclusion that the ordinance violates the statute. The Supreme Court of Missouri reached such a conclusion under similar facts in City of Dellwood v. Twyford, 912 S.W.2d 58 (Mo. 1995). There, the city’s ordinance required owners to submit an application and pay a fee before advertising real property for sale. Noting that section 67.317 does not authorize cities to impose any restrictions other than reasonable dimension restrictions, the Court held the ordinance invalid. Id. at 60. Likewise here, section 112.4(a) of ordinance 2057 purports to impose a restriction that section 67.317 expressly prohibits.As such, we hold it invalid. Point granted.
And finally the conclusion of the appellant court decision was:
The judgment of the trial court is reversed.
I assumed that this decision by the appellant court would cause the City of Bellefontaine Neighbors to stop enforcing the part of their ordinance deemed unconstitutional and in violation of State Law by the appellant court, but it appears my assumption may be wrong, at least for now. I say this because I just called Bellefontaine to confirm they were not enforcing these parts of the ordinance and after speaking with Karen in the building department it appears the city is still enforcing the ordinance, in spite of the appellant court decision.
I asked Karen if I was a homeowner and called city hall saying that I wanted to put my home on the market and was it OK to advertise it and put up a for-sale sign what I would be told and she told me that I would be told that I need to come in and fill out a building inspection application, pay the fee, and then after the initial building inspection I could then advertise my home for sale and put up a sign. Hmm…not sure what they are thinking…..
Fannie Mae is offering 3.5 percent in closing cost assistance or an equivalaent amount in appliances for people purchasing a Fannie Mae-owned HomePath® property.
Fannie Mae is trying to entice buyers to buy one of their HomePath® homes by offering to pay up to 3.5 percent in closing cost assistance or an equal amount toward new appliances for owner-occupants who close on the purchase of a property listed on HomePath.com before May 1, 2010. First-time homebuyers, and some long-term homeowners, will also be eligible for the Homebuyer Tax Credit.
Properties eligible for this incentive are listed on HomePath.com and most listings include detailed property descriptions, photographs, community and school information and more. In addition, many Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing which offers homebuyers an opportunity to purchase with as little as 3 percent down.
“Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover. Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help,” said Terry Edwards, Executive Vice President of Credit Portfolio Management. “Homebuyers have the option to choose between financial assistance toward closing costs or new appliances for their home.”
In spite of what is being said in the press about the real estate market improving and the effectiveness of the government’s programs to help keep people in their homes, the rate of foreclosure just keeps increasing.
A report released today by First American CoreLogic showed the St. Louis metro area to have a foreclosure rate of 1.43 percent up slightly from November’s rate of 1.35 percent and an increase of 66.67 percent from the year prior when the rate was 0.87 percent.
The national foreclosure rate for December was again over double the rate of St. Louis at 3.16 percent and was an increase of 82.6 percent from a year ago when the national foreclosure rate was 1.73 percent.
From new data on mortgage delinquencies, it appears we are going to continue to see the St. Louis foreclosure rate remain at, or above, the current levels for some time. St. Louis homeowners that are are seriously delinquent on their mortgages (90+ days delinquent) rose in December to 5.73 percent of the mortgages in St. Louis. This a small increase from November’s rate of 5.49 percent but is a 50 percent increase from a year ago when the rate was 3.82 percent. The U.S. rate for seriously delinquent mortgages in December was 8.40 percent, an increase of over 62 percent from a year ago when the rate was 5.16 percent.
Bank of America has systems in place to begin implementing the Second Lien Modification Program (2MP) with the release of final program policies and guidelines by federal regulatory agencies, which is expected soon. 2MP will require modifications that reduce the monthly payments on qualifying home equity loans and lines of credit under certain conditions, including completion of a HAMP modification on the first mortgage on the property.
“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America Home Loans.
This is a pretty significant move since Bank of America is the largest mortgage servicer in the country with nearly 14 million loans, approximately 3 million of which are second liens. The bank says they will modify eligible second liens regardless of whether the first lien is serviced by them or another servicer.
FHA loans gained in popularity for borrowers as applications for FHA-guaranteed mortgages exceeded an annual rate of 3 million in October; nearly triple the level in 2007. In 2006, when subprime and other Wall Street programs were at full speed, the annual rate for applications was less than 600,000.
As a result the Federal Housing Administration (FHA) Commissioner David Stevens recently announced a set of policy changes to strengthen the FHA’s capital reserves. The changes announced are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery. The goal is to balance risk management and continue to provide affordable, responsible mortgage products.
Announced FHA loan Policy Changes:
Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
Update the combination of FICO scores and down payments for new borrowers. (tougher standards)
Reduce allowable seller concessions from 6% to 3%
Increase enforcement on FHA lenders
St. Louis Mortgage Rates – February 2, 2009 *
30-year fixed-rate mortgage 5.00% no points
15-year fixed-rate mortgage 4.375% no points
5/1 adjustable rate mortgage 3.875% no points
3/1 adjustable rate mortgage 3.750% no points
Jumbo 5/1 ARM 4.125% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
*Note- The above rates are based upon a typical sale price of $187,500 with a 20% percent down payment leaving a loan amount of $150,000 to a borrower with a 720 credit score for a loan with no discount points charged. Rates and terms will vary depending upon loan amount, home value, credit and income of borrower.
This information is provided by this author and this site for informative purposes only and is not warranted or guarteed in any way.
December”s pending home sales index (seasonally adjusted) was 96.6 (the index is based upon 100.0 being equal to the average level of sales activity in 2001 which we could call the last “normal” year) which was a 1.0% increase in the index from November and an increase of 10.9 percent from the year before.
December”s not-seasonally adjusted index index was at 64.0, a 18.1 percent decrease from November and a 10.5 percent increase from a year ago.
Oh yeah, now that I have given my take on things, you can see what Lawrence Yun, the chief economist for NAR, has to say about it:
The U.S. Department of Commerce released a report showing the sale of New Homes in December were at a seasonally adjusted annual rate of 342,000, a 7.6 percent decrease from the revised November rate of 370,000 and is 8.6 percent below a year ago.
My Mantra
As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.
Effect of tax credits on homebuyers like kid’s “sugar-rush”?
Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”
23,000 new homes sold in December, an 11.5 percent decrease from November’s 26,000 new homes sold and also a 11.5 percent decrease from December 2008 when there were 26,000 new homes sold
52 percent (12,000) of the new homes sold were in the South region- a decrease of 14.2 percent from November’s 14,000 new homes sold
the west region had 5,000 new homes sold the same as the month before.
the Midwest had 3,000 new homes sold, a 40 percent decrease from November’s sales of 5,000 homes.
The Northeast was the only region with an increase in sales. Decmebers sales of 3,000 homes was a 50 percent increase from November’s 2,000 new homes sold.
374,000 new homes sold in 2009 which is a 22.9 percent decrease from 2008 when there were 485,000 new homes sold.
All four regions saw fewer home sales in 2009 than 2008.
Midwest decrease of 22.9 percent
South decrease of 24.` percent
West decrease of 23.7 percent
Northeast decrease of 11.4 percent
Median sale price of new homes in the US in December was $221,300.
For the new homes sold in the US in December the median time they have been on the market for sale is 13.9 months.
Inventory of new home in US at end of December is 234,000 which translates into a 10.2 month supply.
So how accurate was my predicion for 2009?
For some time I have been predicting new home sales for 2009 would end up around 385,000 – 395,000…In November I pinned the number down at 390,000…I was feeling somewhat optimistic because of the tax credits. It looks like I was a little too optimistic and was off by 16,000 homes or 4.2 percent….I guess not too bad for an amateur…
My prediction for 2010
With everything going on in our economy, elections this year, etc, it is really hard to predict what will happen in the new home market. Having said that, I will say that I don’t see 2010 being worse than 2009, unless interest rates increase significantly during the year or unemployment does not improve. Abset those two events I am going to predict that 2010 will be just slightly better than 2009 and come in at 380,000 – 400,000 homes sold.
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Today, TransUnion had more sobering news for the real estate market; the mortgage loan delinquency rate (the ratio of borrowers 60 or more days past due) increased for the 12th straight quarter, hitting an all-time national average high of 6.89 percent for the fourth quarter of 2009. The fourth quarter marks the first time the mortgage delinquency rate increase did not decelaerate after doing so in the three prior quarters.
According to the video, One West Bank received a cushy, “sweetheart deal” and implied it was related to the fact that the owners of One West Bank include Goldman Sachs VP, Steven Mnuchin, billionaires George Soros and John Paulsen, and that “it’s good to have friends in high places.” Here is a recap of some of the “facts” of the deal they gave on the video:
Valentine’s Day is a time for love…Are you feeling left out because you haven’t found Mr or Mrs Right? 
The St. Louis area has seen increases in the foreclosure rate every month since August, 2008 and the the December 2009 rate is the highest rate recorded since First American CoreLogic began tracking the data. For comparison purposes, back in January of 2005 the foreclosure rate was 0.48%, or roughly one-third of the current rate.
Bank of America 
the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.
