REALTORS tell President Obama his budget proposal will harm housing and homeowners

st-louis-realtor-dennis-norman-real-estateToday, Moe Veissi, President of the National Association of REALTORS, issued the following statement in response to President Obama’s budget proposal: “As the leading advocate for housing and homeownership, NAR is strongly opposed to elements of President Obama’s budget proposal that would limit itemized deductions, including the mortgage interest deduction, for thousands of families.”
Continue reading “REALTORS tell President Obama his budget proposal will harm housing and homeowners

Scorecard on Obama’s Housing Recovery Plans

Dennis Norman St Louis

Dennis Norman

The U.S. Department of the Treasury and the Department of Housing and Urban Development today released their “October 2010 Scorecard” on the “Obama Administration’s Efforts to Stabilize the Housing Market”.

The scorecard points out the success of “The President’s housing market recovery efforts” but does point out that “data in the scorecard also show that the recovery in the housing market continues to remain fragile.” Continue reading “Scorecard on Obama’s Housing Recovery Plans

Home Affordable Modification Program (HAMP) Update


Dennis Norman

As readers know, I have been somewhat critical of the Home Affordable Modification Program (HAMP) which is part of the Obama administrations’ Making Home Affordable Program for a few reasons, one is I believe it is just a temporary “band-aid” and not a cure for the problem and two, it does not appear the program is going to help near as many people as the Obama administration initially said it would. Yesterday a report was issued that shows there is progress being made and, through the end of March, a total of 230,000 homeowners have received a permanent loan modification, which is good, but it is not enough to put the program on track to help 3-4 million people by 2012 as originally promised (although as I addressed in a recent post, the administration has changed their position on what was promised).

Highlights from the report:

  • HAMP Trials offered to borrowers since inception of program – 1,436,802
  • All HAMP Trials Started Since Program Inception – 1,166,925
    • 57,000 new trial modifications were added in March, down from 72,000 in February.
  • Permanent modfications have been received – 230,801
    • Over 60,000 trial modifications converted to permanent modifications in March, and increase from almost 53,000 in February.
  • Current Active Modifications (Trial and Permanent) – 1,008,873
    • Active Trial Modifications – 780,951
    • Active Permanent Modifications – 227,922
  • Pending Permanent Modifications – 108,212
  • Trial Modifications Canceled – 155,173
  • Permanent Modifications Canceled – 2.879



Obama Administration HAMP Loan Modification Program Falling Short

Dennis Norman

The Treasury Department Plans to Spend $50 Billion on HAMP…Is it Going to “help keep “3 to 4 million Americans in their homes” as Promised Though?

Last week Herbert M. Allison, Assistant Secretary for Financial Stability for the U.S. Department of the Treasury, testified before the House Committee on Oversight and Government Reform as to “Is the Home Affordable Modification Program Preserving Homeownership?”.

Early in his testimony Allison states that, at the time the HAMP program was announced, President Obama said the program would “enable as many as 3 to 4 million homeowners to modify the terms of the mortgages”. Allison goes on to say that now that we are one year into the program that “HAMP is on track to have actual trial modifications for up to 3 to 4 million homeowners by 2012.” Hmm…am I missing something, or did the President’s message get watered down here? When HAMP was announced and there was all the talk by the administration of modifying loans for 3 to 4 million Americans to “keep them in their homes” I assumed that they meant for Americans to keep their homes longer than an extra month or two which would be the hoped for outcome of borrower’s receiving a permanent loan modification. Unfortunately now it looks like, based upon Allison’s testimony, the administration is changing their postion now and are now saying the 3-4 Million people they referred to includes not only the people that actually receive a permanent loan modification (so far only 12 percent of the people that were offered a trial modification) but all of the people that received a trial modification (lower payment for 3 months) and even those people that were offered a trial modification but didn’t take it. It appears to me the benefit of the HAMP program has been greatly overstated; the benefit of HAMP appears to have over-promised and under-delivered.

Later, in his testimony, Allison says that HAMP was “designed to keep eligible homeowners in their homes with long term affordable mortgages” which seems like a contradiction to me. Based upon his earlier statement it seems a large part of the plan is just to offer a borrower a temporary short-term modification and call it a success.

Here are the facts and figures from the testimony:
  • Since HAMP began 1.4 million people have been offered a loan modification for a trial period of 3 months
    • As of the end of February, 1.1 million people that were offered a trial period (78.5 percent), have entered the trial modification.
    • As of the end of February, 822,000 (58.7 percent of those offered a trial and 74.7 percent of the people that entered into the trial phase) people had been in the trial phase of the modification process for more than three months and could be eligible for conversion to a permanent loan modification subject to “submitting all necessary documents, remaining current on payments and meeting other technical requirements”. (The number of people of the 822,000 that completed the trial but failed to receive a permanent modification due to one of more of the aforementioend conditions was not given but would be an interesting stat to see).
    • As of the end of February 170,000 people have received a permanent loan modification (12.1 percent of the total number of people offered a trial, 15.5 percent of the total people that entered a trial and 20.7 percent of the total people that completed the trial)
    • As of the end of February 92,000 more borrowers have been approved for a permanent modification but have not yet received it. Assuming those borrowers can comply with the conditions mentioned above that will bring the total permanent loan modifications up to 262,000 or 18.7 percent of the total people offered a trial and 32 percent of those people that completed the trial period.
  • Allison stated that, even those borrowers receiving a permanent loan modification, “a significant number will redefault.”
  • Allison states “In fact, we designed our program specifically to protect the taxpayer.” Hey, I thought the purpose was to keep 3 – 4 Million Americans in their homes??
  • For those borrowers that have received a permanent loan modification, the median payment reduction has been around $500 per month.

Is this really helping the borrower?

While I don’t want to take away from the significance of someone being able to keep their home, from what I see I question whether or not HAMP is really doing that. The numbers appear to be more window dressing than anything. To count the offer of a 3 month reduction, or even the trial period itself, as a success I think is fact, for the homeowner in that situation it may be down-right cruel and just dragging out their agony. I have heard stories of many borrowers that got their hopes up only to end up back in the same spot a couple of months down the road.

There are some stats that, if I can figure out how to get them, would be interesting such as; the percentage of people that complete the trial period and then fail to obtain a permanent modification for not meeting the conditions discussed above and, as time moves on, the percentage of people that, 6 months or so after receiving a modification, are still able to keep up with their payments.

What is the cost of HAMP?

According to the testimony,the Treasury has set aside $50 Billion in TARP funds for HAMP and they plan on “using the full $50 Billion budget.”

Now lets do a little cost/benefit analyis. For the sake of my analysis we will need to make some assumptions. Below are my assumptions:

  • Let’s give the program the benefit of the doubt and assume that by the time the program ends 4,000,000 borrowers have been offered a trial loan modification.
  • Even though currently only 12.1 percent of the people offered a trial have received a permanent modification, I’m going to use 18.7 percent for the projection of the number of people that receive a permanent loan modification as that is what the number would be if all the people currently approved actually get a modification (I think I’m being generous). Based upon this, by the end of the program 748,000 borrowers will have received a permanent loan modification.

Based upon my assumptions above, if this program ends up costing $50 Billion as indicated and 748,000 borrowers receive a permanent modification, then it works out to costing $66,844 per borrower for the program. The big question is, does this actually “fix” the problem for these folks and are they truly able to stay in their homes or will it do nothing more than delay the inevitable and give these borrowers a few extra months before they find themselves facing the loss of their home again?

Ask me in a couple of years and I’ll have the answer.

Health Care To Be Subsidized By Real Estate

Dennis Norman

UPDATE: March 26, 2010: Pres Obama signed HR 35909 into law on March 23, 2010. Yesterday the House and Senate approved the final version of HR 4872 and it now goes to the President for his signature (this is the bill that “taxes” real estate to pay for health care as I explained below) – end of update

Unless you live in a cave you have probably heard by now that yesterday Congress passed HR 3590, the “Patient Protection and Affordable Care Act”, or to put it more short and to the point, Pres. Obama’s “health care overhaul”. It is anticipated that President Obama will sign this into law today or tomorrow.

Also passed yesterday by the US House of Representatives was HR 4872, the “Health Care and Education Affordability Reconcialiation Act of 2010“, which makes changes to HR 3590 (so why did the House pass HR 3590 if there were changes they wanted made?? Politics baby, politics!). As soon as the President signs HR 3590 into law the Senate will take up debate on HR 4872 and will take a simple majority (51) of the Senate for passage. If the Senate does approve this bill as written it will then go to the President to be signed into law and will amend the “Patient Protection and Affordable Care Act”.

So what does health care have to do with real estate? Plenty, because if HR 4872 (the Reconcialition Act) becomes law. real estate (along with other passive investments) will taxed to help fund the bill. I say this because of Sec. 1402 of the bill, which addresses “Medicare Tax” and states that:

‘‘(1) APPLICATION TO INDIVIDUALS.—In the case of an individual, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax equal to 3.8 percent of the lesser of—‘‘(A) net investment income for such taxable year, or ‘‘(B) the excess (if any) of—‘‘(i) the modified adjusted gross income for such taxable year, over ‘‘(ii) the threshold amount.

This means that for people that have passive income from real estate, such as rents, will be subject to medicare tax on that income, unless, of course, you are under the income threshold amount which is defined in the bill as:

‘‘(b) THRESHOLD AMOUNT.—For purposes of this chapter, the term ‘threshold amount’ means—‘‘(1) in the case of a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $250,000, ‘‘(2) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1⁄2 of the dollar amount determined under paragraph (1), and ‘‘(3) in any other case, $200,000.

In addition, Obama’s 2011 budget proposes inreasing the tax rate on capital gains to 20 percent, from the current 15 percent, for “high-income taxpayers” (defined as copules with 2011 taxable income above $235,450 and single people with income over $194,050).

It will be interesting to see how this plays out in the days and weeks to come. The interesting thing will be to see how long it takes everyone (including the politicians thatvoted for this) to figure out what the true cost of this legislation will be….oh yeah, and also how many Doctors decide to take early retirement.

Survey Shows Obama Falls Short on Housing Market Promises

Even in Tough Times, 77 Percent of Americans View Homeownership as a Part of Their Own Personal American Dream

A national survey released yesterday by Trulia shows that many Americans feel that President Barack Obama has not lived up to the hope he created during his campaign and his first 30 days in office. In Trulia’s latest American Dream survey conducted online on its behalf by Harris Interactive from January 19-21, 2009 President Barack Obama scored considerably lower marks on the topic of restoring the American dream of home ownership compared to a survey conducted February 20-24, 2009 after his first 30 days in office.

The current survey found that 37 percent of Americans gave President Obama a grade of “D” or “F” on the decisions he’s made towards restoring the American dream of home ownership compared to only 22 percent in the February 2009 survey. Additionally, 54 percent gave him a grade of “A” or “B” in February 2009 compared to only 37 percent in January 2010. Despite these lower grades, and the troubles that have continued to plague the U.S. housing market, the survey found that the “American Dream” of homeownership continues to be alive and well with more than three out of four Americans considering owning a home as a part of achieving their personal American dream.

“I am thrilled to see that the American dream of homeownership is alive. If the dream had died we would be in a lot of trouble,” said Pete Flint, CEO and co-founder of Trulia. “Everyone realizes there is no easy fix and we have a long road ahead. Until there is a reversal in unemployment and the growing number of home foreclosures, the U.S. real estate market will continue to see significant volatility. I agree with the results of our survey that job creation and job security have to be the President’s top priority.”

President Obama’s Report Card

Democrats currently rate President Obama’s performance higher than Republicans, but both downgraded the President’s performance in the January 2010 survey compared to the survey Trulia conducted in February 2009. The current survey shows that “A” ratings from Democrats decreased by 19 percentage points and a 3 percentage point decrease from Republicans. Additionally, “F” ratings from Democrats increased by 3 percentage points and by 13 percentage points from Republicans.

Jan. 2010 Grades Republican Democrat All Adults
“A” 2% 19% 11%
“B” 10% 43% 26%
“C” 24% 25% 26%
“D” 27% 7% 16%
“F” 37% 6% 22%
Feb. 2009 Grades Republican Democrat All Adults
“A” 5% 38% 21%
“B” 18% 42% 33%
“C” 31% 14% 24%
“D” 21% 3% 10%
“F” 24% 3% 12%

Priorities Going Forward

Democrats and Republicans agree on the areas President Obama needs to focus on in 2010 to stabilize the U.S. real estate market. Creating jobs and job security continues to be at the top of the list with 62 percent of adults referencing it as a key priority for the President. With foreclosures reaching record levels in 2009 and expected to grow even more this year, it’s not surprising that 45 percent of adults included this as an important area of focus. Rounding out the top three priorities for President Obama is bringing/keeping low interest rates at 39 percent. Only 27 percent of Americans surveyed believe extending the home buying tax credit through the end of 2010 should be a key initiative to help stabilize the housing market.

Jan 2010 Focus Republican Democrat All Adults
Create Jobs & Job Security 58% 65% 62%
Reduce Foreclosures 37% 54% 45%
Lower/Keep Low Interest Rates 43% 43% 39%
Extend Home Buying Tax Credit Through 2010 24% 32% 27%
Other 14% 4% 11%

This sentiment was also echoed on Trulia Voices Community, with many users feeling that President Obama tried to do too much, and that the key to fixing the economy and housing market will be to focus on creating new jobs and job security.

Positive and Negative Views

The majority of Americans surveyed were unaffected by the events that have transpired during the past year in the housing market, with 60 percent saying their view towards homeownership is unchanged. Slightly more of those surveyed have a more pessimistic than positive outlook with 21 percent saying they have at least a somewhat more negative view towards owning a home compared to 20 percent having at least a somewhat more positive view.

Survey Methodology
The Trulia American Dream housing study is conducted online periodically by Harris Interactive on behalf of Trulia. Harris Interactive® fielded this current study on behalf of Trulia from January 19-21, 2010 via its QuickQuerySM online omnibus service, interviewing a nationwide sample of 2,232 U.S. adults age 18 years or older, of whom 1,523 were homeowners and 614 were renters, and 702 were Democrats and 601 were Republicans. Results were weighted as needed for age, sex, race/ethnicity, education, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online. No estimates of theoretical sampling error can be calculated; a full methodology is available.
Harris Interactive® also fielded the February 2009 survey on behalf of Trulia from February 20-24, 2009 via its QuickQuery(SM) online omnibus service, interviewing a nationwide sample of 2,076 U.S. adults age 18 years or older, of whom 1,418 were homeowners and 595 were renters, and 732 were Democrats and 573 were Republicans . Results were weighted as needed for age, sex, race/ethnicity, education, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online. No estimates of theoretical sampling error can be calculated; a full methodology is available