By Dennis Norman, on March 9th, 2010  Dennis Norman The Mortgage Bankers Association (MBA) released its report on the performance of commercial and multifamily mortgages in the fourth quarter of 2009. Their last report from a year ago showed that commercial and multifamily mortgages were among the best performing loans held by banks and thrifts. Now, a year later, the data still looks good and shows that commercial and multifamily mortgages continue to have the lowest charge off rate of all loan types at banks and thrifts and also perform better than their overall portfolios as well.
This is good news for an already-struggling banking industry, especially since, according to the MBA report, commercial and multifamily loans together account for 35 percent of all bank loan holdings (residential loans, including 1 to 4 families, make up 26 percent of the bank loan holdings).
Highlights from the report (all data is as of end of fourth quarter, 2009):
- Mortgage Delinquency –
- 7.30 percent of all loans and leases held by banks and thrifts were 30 or more days past due.
- 5.06 percent of commercial mortgages were 30 or more days past due.
- 5.64 percent of multifamily mortgages were 30 or more days past due.
- 4.39 percent of commercial and industrial loans were 30+ days past due.
- Construction loans had the highest delinquency rate at 18.56 percent 30+ days past due, followed next by single-family mortgages at 12.49 percent.
- Surprisingly (at least to me) credit card delinquency rates were about half that of single-family mortgages at 6.28 percent.
By Dennis Norman, on March 5th, 2010
Dennis Norman
St. Louis Mortgage Delinquencies and St. Louis Foreclosure Rate hit Record Highs
A report released by First American CoreLogic showed the St. Louis metro area to have a foreclosure rate in January of 1.42 percent up slightly from December’s rate of 1.36 percent and an increase of 46.39 percent from the year prior when the rate was 0.97 percent.
The national foreclosure rate for January remains over twice the rate of St. Louis at 3.19 percent and was an increase of 60.3 percent from a year ago when the national foreclosure rate was 1.99 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 January to 5.98 percent of the mortgages in St. Louis. This represents an increase of 4.36 percent from December’s delinquency rate of 5.73 percent and is an increase of 48.76 percent from a year ago when the rate was 4.02 percent. The U.S. rate for seriously delinquent mortgages in January was 8.66 percent, an increase of over 56 percent from a year ago when the rate was 5.53 percent.
So while some of the housing reports for St. Louis are getting better and showing some signs that we may have hit the “bottom” of the market, the foreclosure rate and mortgage delinquency rate hangs over us like a dark cloud. These things lead to distressed sales which bring downward pressure on the market and sometimes makes it hard to establish a bottom and certainly hinders a recovery.
To show you what I mean I’ll share a short story. I had lunch this week with a St Louis real estate agent that has some new homes listed in a new development in a nice part of the city. The list price of his homes is in the $290,000 range, down significantly (15-20 percent) from what the prices were before the crash. The agent said that the price reductions just weren’t enough though, that he was being hurt by REO’s. For example, one home in the development that had sold new a couple of years ago for over $400,000 (it was loaded with extras and upgrades) was foreclosed on and just sold as an REO for $260,000, making his new home, without all the upgrades, at 15 percent more not look like such a bargain. Granted, that was just one REO and it is gone now, but with the St Louis delinquency rates and St Louis foreclosure rates what they are there will be more REO’s.
By Robert Fishel, on March 3rd, 2010 
Low foreclosures, stable home prices and affordability make eighth-ranked St. Louis a good bet for home buyers, according to a report released by Forbes.com last Friday.
Forbes gathered data from the National Association of Home Builders and Wells Fargo’s Housing Opportunity Index (HOI). The index measures median home prices against median incomes.
Additional data overlays included Moody’s one-year forecast for the Case-Shiller Home Price Index of home prices and RealtyTrac’s 2009 foreclosure report. Rankings from all of these data sources were considered in determining the overall score.
The top ten best housing metro areas:
Pittsburgh, PA
Louisville – Jefferson County, KY – IN
Houston – Sugar Land – Baytown, TX
Minneapolis – St. Paul, Bloomington, MN – WI
Indianapolis – Carmel, IN
Columbus, OH (Tie for 6th)
Memphis, TN – MS – AR (Tie for 6th)
St. Louis, MO – IL
Dallas – Ft. Worth, TX
Austin – Round Rock, TX
St. Louis families in the market for a house are shopping at the right time. Homes are near the most affordable they’ve been in 18 years.
At a national level in the fourth quarter of 2009, housing was 62.4% more affordable than the same time a year earlier, according to the HOI which is published quarterly.
The Midwestern cities of St. Louis, Indianapolis and Minneapolis made the list even though their housing price forecasts are essentially flat, but “housing in these places is eminently affordable” according to Forbes reporter Francesca Levy.
Just under 85 percent of all families in St. Louis who make the median income have access to affordable, decent housing.
“The recession has weighed down home prices, but mortgage rates are still at historic lows, giving families a chance to get in on the ground floor,” states Levy.
St. Louis Mortgage Rates – March 3 , 2010 *
- 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.
By Dennis Norman, on February 25th, 2010 Dennis Norman 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. :)
By Robert Fishel, on February 24th, 2010
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.
By Dennis Norman, on February 23rd, 2010 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.
   
By Robert Fishel, on February 17th, 2010
More than 380 mortgage lending operations nationwide have ceased operation since 2006, according to the Mortgage Lender Implode-O-Meter website.
However in spite of a tough and demanding economic market, Paramount Mortgage this 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.
By Dennis Norman, on February 16th, 2010 Dennis Norman
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 between 7.5 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.
 Source: TransUnion
By Dennis Norman, on February 15th, 2010 Dennis Norman 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 not the 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.
ThinkBigWorkSmall.com Video
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.
I went to the FDIC website and found what I believe to be the original Indymac sale agreement as well as the loss sharing agreement with One West Bank as well as a supplemental information document on the sale the FDIC published after the sale.
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…
By Dennis Norman, on February 12th, 2010 Dennis Norman 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.
By Dennis Norman, on February 11th, 2010  Dennis Norman
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.
By Robert Fishel, on February 10th, 2010
There is time left for qualified buyers to take advantage of the 2009 First-Time Home Buyer’s $8,000 Tax Credit & Repeat Home Buyer’s $6,500 Tax Credit. Binding sales contract must be executed by April 30, 2010, the closing can be extended until June 30, 2010.
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.
By Dennis Norman, on February 5th, 2010 Dennis Norman 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.
By Robert Fishel, on February 3rd, 2010
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.
By Robert Fishel, on January 27th, 2010 The mortgage market will be besieged this week by a wave of worry…demand concerns related to Treasury auctions to the question about what happens if Fed Chairman Bernanke is not confirmed for another term… uncertainty seldom pushes rates lower.
St. Louis Mortgage Rates – January 27, 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
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.
By Dennis Norman, on January 18th, 2010 Dennis Norman MortgageDaily.Com tracks mortgage company failures on it’s website The Mortgage Graveyard. According to The Mortgage Graveyard 225 mortgage-related firms in the U.S. ended operations or failed in 2009, higher than any year since they began tracking data in 1998. This was an increase of over 80% from 2008 which saw 124 firms fail.  The annual surge was fueled by a spike in bank failures — which increased more than 400 percent. Banks account for most of the country’s residential originations. Credit union failures, including corporate and state-regulated institutions, were up by more than a third.
Here in St. Louis it appears lenders have fared better and, according to MortgageDaily.com there was only one failure in 2009 and that was Gateway Bank. According to a story published November 9, 2009 by Mortgage Daily.Com the Missouri Division of Finance reported it took possession of Gateway Bank after “several unsuccessful attempts by the bank’s ownership and management to sell or find new capital. The bank had been an aggressive lender and faced a $2,500 civil money penalty by the FDIC in June and another in May 2008.”
We are likely to see the disappearance of many mortgage companies, or their merger’s with bank partners, in 2010 as a result of tough new rules that took effect January 1st favoring bank-operated mortgage companies over independent mortgage brokers and mortgage bankers.
By Dennis Norman, on January 15th, 2010 Dennis Norman If you are one of the million-plus homebuyers that was fortunate enough to qualify for the Home Buyer tax credit, read on for information on how to claim your credit.
Today the Internal Revenue Service released a new form that eligible homebuyers must need to use to claim the first-time homebuyer credit this tax season, along with instructions and guidelines for other documentation that must accompany your tax return.
The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.
The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February after it completes the updating and testing of systems to meet the law’s new requirements. The updates allow the IRS to put in place critical systemic checks to deter fraud related to the homebuyer credit.
Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.
In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:
- A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
- For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
- For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:
- Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
- Property tax records or
- Homeowner’s insurance records.
The IRS also reminded homebuyers that the new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.
Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.
The IRS encourages taxpayers to use direct deposit to speed their refund. In addition, taxpayers can use Where’s My Refund? on IRS.gov to track the status of their refund.
More details on claiming the credit can be found in the instructions to Form 5405, as well as on the First-Time Homebuyer Credit page on IRS.gov.
By Dennis Norman, on January 14th, 2010 Dennis Norman I would say it’s say to say that the Obama administrations efforts to curtail the foreclosure rate is not working as the foreclosure rate in St. Louis increased again in November according to a report released today by First American CoreLogic.The report showed the St. Louis metro area to have a foreclosure rate of 1.35 percent in November, up just slightly from October’s rate of 1.31 percent and increase of 68.75 percent from a year ago when the rate was 0.80percent.
The national foreclosure rate for November was again over double the rate of St. Louis at 3.09 percent and was an increase of 77.6 percent from a year ago when the national foreclosure rate was 1.74 percent.
It doesn’t appear the rate of foreclosures is going to slow down anytime soon either. The rate of borrowers that are seriously delinquent on their mortgages (90+ days delinquent) continues to rise hitting a rate of 5.49 percent in November for the St. Louis area. This a slight increase from October’s rate of 5.27 percent but is a 52 percent increase from a year ago when the rate was 3.61 percent. The U.S. rate for seriously delinquent mortgages in November was 8.14 percent, an increase of over 67 percent from a year ago when the rate was 4.86 percent.
By Dennis Norman, on January 13th, 2010 St. Louis mortgage rates this week remain unchanged on fixed rate loans this week but dropped slightly on ARM’s according to St. Louis-based Paramount Mortgage Company.
Lower interest rates, low prices and the extension and expansion of the home-buyer tax credit should be pretty tempting to buyers out there.
St. Louis Mortgage Rates – January 13, 2009 *
- 30-year fixed-rate mortgage 5.125% no points
- 15-year fixed-rate mortgage 5.00% no points
- 3/1 adjustable rate mortgage 3.875% no points
- 5/1 adjustable rate mortgage 4.000% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact John Frank by phone at (314) 372-4300, email at hjfrankjr@paramountmortgage.com or you can visit his 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.
By Dennis Norman, on January 11th, 2010 Dennis Norman Depending on which estimate you believe, somewhere between one-third and one-half of the homeowners with a mortgage in the U.S. owe more on their homes than their homes are currently worth. This has lead to an unprecedented amount of short-sales and in many cases, a lender “forgiving” you of the short-fall (the amount of your loan your sale proceeds were not adequate to pay) which, in the past could have left you owing taxes on the “forgiven debt”.
For some of those underwater homeowners that are not fortunate enough to do a short sale they may end up losing their homes through foreclosure. Like short sales, in the past some foreclosures also resulted in the homeowner finding they owe taxes as a result of the foreclosure.
Fortunately seller’s in these situations today are getting some relief through the Mortgage Forgiveness Debt Relief Act which, according to the IRS, “generally allows exlusion of income realized as a result of modification of the terms of a mortgage, or foreclosure on your principal residence.” This applies to debt forgiven in 2007 through 2012 up to $2 million in forgiven debt.
The following are some FAQ’s on the subject from the IRS. This is for information only…you should consult your CPA or tax professional to see how this may or may not apply to your situation:
What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.
Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.
How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.
Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.
If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.
Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.
Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.
How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.
Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.
If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.
I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No. Losses from the sale or foreclosure of personal property are not deductible.
If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.
If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence?
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.
What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.
How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2. Any remaining canceled debt must be included as income on your tax return.
(2) File Form 982 with your tax return.
By Dennis Norman, on January 7th, 2010 St. Louis mortgage rates this week bounced around a bit with 30 year fixed rate mortgages and ARM’s decreasing slightly while 15 year fixed rate mortgage rates increased according to St. Louis-based Paramount Mortgage Company.
Lower interest rates, low prices and the extension and expansion of the home-buyer tax credit should be pretty tempting to buyers out there.
St. Louis Mortgage Rates – January 6, 2009 *
- 30-year fixed-rate mortgage 5.125% no points
- 15-year fixed-rate mortgage 5.00% no points
- 3/1 adjustable rate mortgage 4.00% no points
- 5/1 adjustable rate mortgage 4.125% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact John Frank by phone at (314) 372-4300, email at hjfrankjr@paramountmortgage.com or you can visit his 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.
By Dennis Norman, on December 30th, 2009 St. Louis mortgage rates inreased again this week bringing 30 year rates above 5 percent according to St. Louis-based Paramount Mortgage Company.
Lower interest rates, low prices and the extension and expansion of the home-buyer tax credit should be pretty tempting to buyers out there.
St. Louis Mortgage Rates – December 30, 2009 *
- 30-year fixed-rate mortgage 5.25% no points
- 15-year fixed-rate mortgage 4.75% no points
- 3/1 adjustable rate mortgage 4.25% no points
- 5/1 adjustable rate mortgage 4.50% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact John Frank by phone at (314) 372-4300, email at hjfrankjr@paramountmortgage.com or you can visit his 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.
By Dennis Norman, on December 28th, 2009 Dennis Norman
To answer this question I turned to the housing forecast just released by Fannie Mae to see what their economists were predicting. Here are the highlights from the report, showing actual numbers for the 3rd quarter of this year as well as Fannie Mae’s projection for 4th quarter of this year as well as 4th quarter of 2010:
- New Home Starts (seasonally adjusted annual rate)
- 3rd quarter actual- 499,000
- 4th quarter 09 projection – 502,000 (+0.06 % from 3rd quarter)
- 4th quarter 10 projection – 650,000 ( +29.4% from the year before)
- New Home Sales (seasonally adjusted annual rate)
- 3rd quarter actual- 413,000
- 4th quarter 09 projection – 442,000 (+7.02 % from 3rd quarter)
- 4th quarter 10 projection – 510,000 ( +15.38% from the year before)
- Existing Home Sales (seasonally adjusted annual rate)
- 3rd quarter actual- 5,290,000
- 4th quarter 09 projection – 5,623,000 (+6.29 % from 3rd quarter)
- 4th quarter 10 projection – 5,492,000 ( -2.32% from the year before)
- Median Home Prices-New Homes
- 3rd quarter actual- $210,400
- 4th quarter 09 projection – $214,600 (+2.0 % from 3rd quarter)
- 4th quarter 10 projection – $211,400 (-1.5% from the year before)
- Median Home Prices-Existing Homes
- 3rd quarter actual- $178,300
- 4th quarter 09 projection – $175,200 (-1.73 % from 3rd quarter)
- 4th quarter 10 projection – $172,600 (-1.48% from the year before)
- Mortgage Interest Rates (fixed-rate mortgage)
- 3rd quarter actual- 5.16 percent
- 4th quarter 09 projection – 4.88 percent
- 4th quarter 10 projection – 5.32 percent
So there you have it. A somewhat encouraging forecast for the housing industry for next year. A prediction of increased new home sales, a little bump in existing home sales at the end of this year (from the homebuyer tax credit no doubt) and then a slight drop in sales next year from that rate, a slight drop in home prices in the next year and interest rates that are still attractive. If all this pans out 2010 will no doubt end up being a kinder year to the housing industry than 2009 was.
Ah, but wait…I know what you’re thinking…same thing as me. What do these guys know? After all wasn’t it Fannie Mae that had accounting issues, management problems and has been blamed by some to be a contributor to the housing bust? Well, lets take a look at their housing forecast from a year ago and how accurate their projections were then. For the sake of this comparison we will compare their forecast for the 3rd quarter of 2009 with the actual numbers from above:
New Home Starts (seasonally adjusted annual rate)
3rd quarter 2009 actual- 499,000
3rd quarter forecast – 526,000 (over by 5.41%)
New Home Sales (seasonally adjusted annual rate)
3rd quarter2009 actual- 413,000
3rd quarter forecast – 472,000 (over by 14.29%)
Existing Home Sales (seasonally adjusted annual rate)
3rd quarter 2009 actual- 5,290,000
3rd quarter forecast – 5,003,000 (under by 5.42%)
Median Home Prices-New Homes
3rd quarter 2009 actual- $210,400
3rd quarter forecast – $208,600 (under by 0.85%)
Median Home Prices-Existing Homes
3rd quarter 2009 actual- $178,300
3rd quarter forecast – $186,600 (over by 4.66%)
Mortgage Interest Rates (fixed-rate mortgage)
3rd quarter 2009 actual- 5.16 percent
3rd quarter forecast – 5.44 percent (over by 5.42%)
Considering all the factors that affect the housing market I actually think Fannie Mae did pretty good in their forecast last year. They overshot new home sales a fair amount but undershot existing home sales by a much smaller percentage. Overall on combined home sales they got within 4% of predicting the number of sales. I also think they did pretty good on median home prices.
So, since Fannie Mae’s projections last year were fairly accurate lets hope the current projections will prove to be as well. If so, then it will be clear that the worst is behind us.
By Dennis Norman, on December 22nd, 2009 According to NAR 51 percent of recent homebuyers are first-time buyers and 39 percent of recent home sales have relied on an FHA loanDennis Norman
The National Association of REALTORS just released a report showing that 51 percent of the homes sold recently have been to first-time home buyers and that 39 percent of all recent buyers have turned to an FHA loan for financing for their home purchase.
I think this clearly illustrates that the first-time home buyer tax credit, coupled with record low interest rates and drastically reduced home prices, is giving buyers, at least first-time home-buyers, the confidence to move forward in their decision to purchase a home. Oh what I wouldn’t give to be a first-time home-buyer today!
“FHA helps provide affordable mortgage financing to homeowners, particularly first-time home buyers who are so important in drawing down inventory to help stabilize the current housing market,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “These recent survey results reaffirm that, despite its current challenges, FHA is a critical part of the American housing fabric.”
By Dennis Norman, on December 21st, 2009 Dennis Norman Foreclosure rates in St. Louis increased for the month of October over the same period last year according to a report released by First American CoreLogic. The report showed the St. Louis metro area to have a foreclosure rate of 1.31 percent in October, up just slightly from September’s rate of 1.25 percent, but up 61.7 percent from a year ago when the rate was 0.81 percent.
The national foreclosure rate for October was over double the rate of St. Louis at 3.02 percent and was an increase of 77.6 percent from a year ago when the national foreclosure rate was 1.70 percent.
It doesn’t appear the rate of foreclosures is going to slow down anytime soon as mortgage delinquency rates rose again in October. In St. Louis 5.1 percent of borrowers were 90 days or more delinquent on their mortgage in October, an increase of 50.0 percent from a year ago. The 90 day mortgage delinquency rate for the state of Missouri in October was 4.83 percent, an increase of 50.0 percent from a year ago. The US mortgage delinquency rate for October was 7.70 percent, up from 7.27 percent in September and an increase of 69.6 percent from a year ago.
By Dennis Norman, on December 17th, 2009
- Dennis Norman
Last week I did a post about the Obama Administrations’ Home Affordable Modification Program (HAMP) and showed how it really has not been effective in helping keep families in their homes and avoid foreclosure as was the intention by the administration. When my kids tell me they don’t like the way I want them to do something I usually challenge them with “if you don’t like my way, tell me a better way to do it“. So with this in mind I went looking for an answer to this question.
-
Why Do Homeowners Default on Mortgages?
-
Issues With Current Solutions to Mortgage Default
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An Alternative Approach to Mortgage Default
I focused primarly on number two as it addressed the problem I was looking for the answer to. Their (Loan Value Group) analysis of the situation was consistent with my post last week in that they determined that government programs to provide solutions to borrowers defaulting on mortgages “have so far proven to be ineffiective for two main reasons…first, certain solutions are founded on the idea that default occurs becasuse households have no choice due to insufficient income, and thus fail to address deafult that is a rational choice that depends on the homeowner’s balance sheet. Second, certain solutions face substantial practical hurdles to implementation.”
Translation:
-
Some borrowers choose to default as they are underwater and tired of throwing good money after bad, not because they cannot make the payments.
-
Government programs have too much red tape.
The report goes on to assess the effectiveness (or lack thereof) of various government programs that were supposed to be the answer. Here are the results:
- Tax Credits. These improve the homeowner’s income, but are ineffective for balance sheet driven strategic default. First, the effect of tax credits is very small compared to the amount of negative equity, and so does little to repair the homeowner’s balance sheet. Second, the homeowner can use the tax credits to rent a new property, allowing him to default on his existing mortgage. In addition, if they fail to prevent default, they are simply a cost to the government. Finally, while the most recent plan to provide tax credits is relatively new, there is increasing evidence that fraud is being used to secure those credits.
- HOPE for Homeowners Act of 2008. This involved the FHA insuring lenders that refinancetroubled loans into fixed-rate mortgages. As of February 2009, only 451 applications had been received and 25 loans finalized, compared to the expected participation of 400,000. The low participation has been mainly attributed to two issues of loan modifications discussed in the prior subsection: the fees associated with a modification, and the need for the lender to reduce loan principal to 90% of a property’s current value.
- Home Affordable Modification Program (HAMP). This is similar to a payment reduction: the servicer modifies the loan to reduce monthly payments to 31% of a homeowner’s pre-tax income. As of August 2009, only 9% of delinquent borrowers (235,000 loans) were in trial modifications, compared to the goal of having 500,000 participants by November 2009.
This low take-up has been attributed to a number of causes. From the borrower’s side, the confusion and disclosure requirements described above have been an impediment; the New York Times (“Winning Lower Payments Takes Patience, and Luck”, 11/29/09) discusses “the confusing and frustrating ways of the Obama administration program aimed at keeping millions of troubled American borrowers in their homes.” One large institution tasked with using a third party to modify loans through HAMP has found that in Q2 2009, nearly 42% of loan modifications that would have resulted a monthly payment reduction were never completed by the borrower.
So what is the answer?
Almost 11 million homeowners underwater on their mortgage (they owe more than their homes are worth) and this is leading to the “strategic mortgage defaults” that are addressed in this report. In order to curtail these defaults there must be new thought given to how to prevent them. Since these underwater homeowners will be choosing to default there must be incentives for the homeowner to choose not to dafault and instead enable the borrower to make payments. In addition, since this decision is driven by negative equity rather than the inability to make payments, there must be something done to address the principal balance.
While reducing the principal balance of an underwater borrower’s loan (principal forgiveness) seems to be the answer to the problem the report does point out problems associated with principal forgiveness including:
- It triggers a full and immediate accounting write-down to the value of the loan.
- It is irreversible and cannot be subsequently “clawed back” for those who redefault or had committed fraud (e.g. when applying for the principal reduction).
- The lower balance reduces the interest received by the lender. Thus, if the homeowner still ends up defaulting, the lender has been made worse off by the loan modification.
- It creates a “moral hazard” problem: the homeowner may attempt to make further risky housing investments in the future, believing that he will receive principal forgiveness if he falls into negative equity
- The impact on homeowner behavior may be limited for two reasons.
- Even a large dollar reduction in absolute terms is small relative to the size of an existing mortgage. If the homeowner “frames” the reduction together with the mortgage (i.e. compares its magnitude to the size of the mortgage rather than evaluating it in isolation), he may feel that his overall position has changed little – for example, a $10,000 reduction on a $200,000 mortgage is only a 5% decrease.
- The loan modification is “non-salient”: it is a one-time event which may be subsequently forgotten, and thus have little ongoing incentive effect.
The above practical and conceptual issues with a principal reduction are serious in reality. As a result, banks have been very reluctant to write off mortgage principal: only 10% of loan modifications involve principal forgiveness. Considering all types of loan modification, 58% of the modifications made in Q1 2008 ended up redefaulting.
So while we have identified the problem, negative equity, and even the solution, principal forgiveness, you can see from this report by Loan Value Group there are many hurdles along the way. What will happen first? Will the government figure out a way to address this issue without so much red tape that the program is actually successful? Or, will the real estate market come back to the point that underwater borrowers see light at the end of the tunnel? I hate to be pessimistic, and I am not pessimistic by nature, however I don’t have confidence in either of these things happening any time soon which is very unfortunate for all the homeowners that have found themselves underwater.
By Dennis Norman, on December 15th, 2009 St. Louis mortgage rates inched up slightly this week but remained at near record-lows according to St. Louis-based Paramount Mortgage Company.
Lower interest rates, low prices and the extension and expansion of the home-buyer tax credit should be pretty tempting to buyers out there.
St. Louis Mortgage Rates – December 15, 2009 *
- 30-year fixed-rate mortgage 5.00% no points
- 15-year fixed-rate mortgage 4.75% no points
- 3/1 adjustable rate mortgage 3.75% no points
- 5/1 adjustable rate mortgage 3.875% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact John Frank by phone at (314) 372-4300, email at hjfrankjr@paramountmortgage.com or you can visit his 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.
By News Desk, on December 12th, 2009
Department of Justice Press Release
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Scam Involved Lawyers, Mortgage Brokers, and More Than $14.6 Million in Loans
PHILADELPHIA—A 15-count indictment was filed today against five defendants charged in a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent mortgage loans, announced United States Attorney Michael L. Levy, Special Agent-in-Charge of the FBI Janice K. Fedarcyk, and Pennsylvania Secretary of Banking Steven Kaplan. Charged are Edward G. McCusker and John Alford Bariana, owners of Axxium Mortgage, Inc., McCusker’s wife, Jacqueline, and Jeffrey A. Bennett and Stephen G. Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C.
According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.
“Unfortunately, the downturn in the economy has given rise to unscrupulous predators looking to cash in on the misfortune of others,” said Levy. “This sort of fraudulent activity not only preys on desperate homeowners, it weakens our financial institutions, destroys neighborhoods by leaving properties abandoned, and devalues the homes of innocent neighbors. This office will investigate and prosecute those who victimize financially distressed homeowners.”
The indictment alleges that the defendants promised financially distressed homeowners that they would find an “investor” who would help them save their home. The defendants would then arrange for a straw purchaser to obtain a fraudulent mortgage and then transfer of the title of the homeowner’s residence to the straw purchaser. Using their company Axxium Mortgage, Edward McCusker and Bariana, along with Jacqueline McCusker obtained the fraudulent mortgages by submitting false documents to mortgage lenders and making false claims about the straw purchasers’ finances. The defendants also concealed from the lender the fact that the homeowner was going to continue to reside in the home and that the mortgage payments were going to continue to be made, in part, by the distressed homeowner and funneled through the straw purchaser. Bariana and Jacqueline McCusker each acted as straw purchasers for 10 homes. The defendants also recruited at least seven other persons to act as straw owners in order to obtain additional fraudulent mortgages.
Bennett and Doherty participated in the scheme at the front and back end. Doherty solicited and referred distressed homeowners to Edward McCusker and used fraudulent bankruptcy filings for some of the distressed homeowners to delay foreclosure until McCusker had obtained an investor and a mortgage. Bennett handled the closings for the real estate transfers, manipulating the information provided to the lender in order to hide the nature of the scheme until after the loan was funded.
“Governor Rendell and I are pleased when state and federal agencies can cooperate to protect consumers and deter improper and criminal activity,” said Pennsylvania Secretary of Banking Steve Kaplan. “U.S. Attorney Levy’s announcement today helps underscore our respective commitments to consumer protection and the Department of Banking’s ability to bring financial expertise to criminal prosecutions.”
“The type of criminal activity alleged in this indictment is particularly despicable in that it targeted those victims who were the most vulnerable financially and the most desperate for some type of assistance to avoid foreclosure on their properties,” said Special Agent-in-Charge Janice K. Fedarcyk of the Philadelphia Division of the FBI. “It also represents an affront to the millions of hard-working Americans who struggle every day to meet their mortgage obligations and keep their families in their homes. The FBI is committed to aggressively pursuing those who engage in schemes designed to illegally profit from the current economic situation of many of our fellow Americans.”
The defendants are charged with conspiracy to commit mail and wire fraud, mail and wire fraud, and conspiracy to commit money laundering. Doherty is also charged with bankruptcy fraud.
INFORMATION REGARDING THE DEFENDANTS
| NAME |
ADDRESS |
YEAR OF BIRTH |
| EDWARD G. MCCUSKER |
New Hope, PA |
1964 |
| JEFFREY A. BENNETT |
Springfield, PA |
1966 |
| STEPHEN G. DOHERTY |
Doylestown, PA |
1966 |
| JOHN A. BARIANA |
Mullica Hill, NJ |
1972 |
| JACQUELINE D. MCCUSKER |
New Hope, PA |
1964 |
Defendants Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years’ imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Defendant Stephen Doherty faces a maximum sentence of 385 years’ imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment. These are the maximum sentences that may be imposed if the defendants are convicted; the advisory United States Sentencing Guidelines call for a sentence less than the statutory maximum.
The indictment seeks forfeiture of the proceeds of the fraudulent scheme, which is alleged to be approximately $14.6 million.
This case was investigated by the Federal Bureau of Investigation and the Pennsylvania Department of Banking. It is being prosecuted by Assistant United States Attorney Nancy Rue.
By Dennis Norman, on December 11th, 2009 Dennis Norman This week the Treasury Department issed a report which included stats on the Home Affordable Modification Program (HAMP) which is part of the Obama administrations’ Making Home Affordable Program and “is a loan modification program designed to reduce delinquent and at-risk borrowers’ monthly mortgage payments”. The HAMP program got underway around March of this year and is set to expire December 31, 2012. According to the government website HAMP is intended to help keep “3 to 4 million Americans in their homes by preventing avoidable foreclosures.”
So is the Loan Modification plan working?
To try to find an answer to this, let’s look at the data in the Treasury Department report (data is through November, 2009): Continue reading “Is the Obama Administrations’ Home Affordable Modification Program (HAMP) working?“
By Dennis Norman, on December 9th, 2009 St. Louis mortgage rates remained at near record-lows this week, with only the 30 year fixed rate mortgage rates increasing slightly, according to St. Louis-based Paramount Mortgage Company.
Lower interest rates, low prices and the extension and expansion of the home-buyer tax credit should be pretty tempting to buyers out there.
St. Louis Mortgage Rates – December 9, 2009 *
- 30-year fixed-rate mortgage 4.875% no points
- 15-year fixed-rate mortgage 4.375% no points
- 3/1 adjustable rate mortgage 3.625% no points
- 5/1 adjustable rate mortgage 3.875% no points
For more information or if you have questions on mortgage rates in St. Louis you may contact John Frank by phone at (314) 372-4300, email at hjfrankjr@paramountmortgage.com or you can visit his 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.
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