September 5, 2008
Filed under: Foreclosure — admin @ 10:36 pm
From Bloomberg today: U.S. Mortgage Foreclosures, Delinquencies Reach Highs
Everyone wants to know when this “market correction” is going to end. You can watch media pundits and dime store economists throwing their expertise into the ring. CEOs of the largest Wall Street firms underscore the monkey with a dart theory of prognostication, considering that we have reached the “bottom” almost every quarter since the inception of this fiasco. In reality, it doesn’t seem that anyone really has a clue. Paulsen has been wrong on at least three occasions; however, to his credit, it’s his job to inspire confidence in the market knowing that his words carry the possibility of dismantling entire economies. The Administration still maintains a delusional optimism that things really aren’t as bad as they seem.
This month we hit a new bottom… Foreclosures are at an all time high….unemployment is exceeding gloomy expectations… the Fed doesn’t have a lot of wiggle room to lower interest rates… the stock market had its worse selloff since June. Fortunately, the price of gasoline has finally started to drop… easing the pain on the middle class. Visa and Mastercard are having a great year, as many Americans leverage their credit again to maintain some quality of life.
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July 2, 2008
Filed under: Foreclosure, Mortgage Industry Legislation — admin @ 12:58 pm
Ruth Lee
With the impending election, Congress left for its July 4th recess unable to face constituents with any real headway on foreclosure legislation. Having started and stopped the discussion of The Foreclosure Prevention Act of 2008 several times, it is disappointing to see that Congress is faithfully endeavoring to do as little as possible even when they have a consensus. Conventional wisdom projected that Congress would be able to finalize the bill prior to the recess, following a test vote of 83 in agreement. But procedural hurdles reared, the final passage undone by a dispute over an unrelated issue for tax breaks on renewable energy, an issue also supported by 88 Senators. (By way of explanation, HR 3221 was initially an energy bill that was gutted and renamed TFPA of 2008)
Essentially, what was once a “gentleman’s” game based on philosophical and political differences is now a cutthroat gauntlet of gaming the system. While one can debate the merits and expense of what many view as a bailout bill, on some level, one would expect some kind of response after months of debate, negotiation and compromise to produce a bipartisan bill. But the fact is, it is an election year. With both sides of the aisle maneuvering for political currency, they are using the procedural rules of the Senate to gain advantage, with the ancillary disadvantage of causing any progress to grind to a halt.
HR 3221 was introduced July 30th, 2007 to the House. It passed the House August 4th, 2007. It passed the Senate April 10, 2008. The Senate bill still has to be resolved with the House version. It is now July again… and still nothing. Other bills like HR 3915 and S 2452 which address predatory lending, have been mostly tabled for partisan concerns, most likely to be revisited post-election. The problem is… we have a consensus, the bill has been voted on and ready to go, so what is the holdup?
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May 20, 2008
Filed under: Foreclosure — admin @ 10:36 pm
Ruth Lee
I thought it would be interesting to share FRB Chairman Ben S. Bernanke’s Comments on Delinquency Rates and the Federal Reserve’s Homeownership and Mortgage Initiatives given in a speech at the Columbia Business School’s 32nd Annual Dinner on May 5.
The following graphics show comparisons of delinquency levels between 04-07:
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March 31, 2008
Filed under: Foreclosure, Mortgage Industry Trends — admin @ 8:56 pm
Ruth Lee
Frankly while not the most conservative amongst my friends in the mortgage world, I could not help but cringe when I saw the proposed legislation for FHA to purchase and refinance “underwater” mortgage loans. This legislation would essentially make FHA the largest scratch and dent lender in the market.
Articles I have been reading note that lenders would have to mark down the principal balance to a 90% CLTV under this program. Writing down this loss is actually considerably better than most can get in scratch and dent market at 40-60 cents on the dollar. What a deal!
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March 11, 2008
Filed under: Foreclosure, Subprime Crash — admin @ 3:37 pm
Ruth Lee
Here is another great article outlining the extending effects of the subprime crash. (As my colleague put it, “Ripple effects that will end up hitting responsible borrowers in their pocketbooks and their lifestyle.”)
From the National League of Cities:
“In addition to the after-effects of foreclosure on families, NLC is educating federal lawmakers about the unexpected consequences the current mortgage crisis is having on local governments. Foreclosed houses, which often sit vacant for long stretches of time, are contributing to the blight long-associated with abandoned properties. Local governments must bear at least the short-term costs of maintaining these vacant properties until they can track down the owner. This can be difficult since mortgages are resold among lenders and investors.
Additionally, since vacant properties all too often become havens for crime, local governments are bearing increased costs for greater police presence in those areas where foreclosed vacant properties are concentrated. At the same time, cities are forecasting that there will be decreased property tax revenues due to declining assessed valuations.”
To read the full article, click here.
March 10, 2008
Filed under: Foreclosure, Subprime Crash, Suburban Foreclosure Epidemic — admin @ 2:10 pm
Ruth Lee
“The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements.”
Christopher B. Leinberger, The Atlantic Monthly, March 2008
Talk about a fascinating article. How far will the effects of foreclosures and the subprime crash really go? Stories about the suburban foreclosure epidemic are rampant, like this one and this one and this one - and that’s just a start.
I guess building and building and building on land reserve is not the best move after all for communities. It makes you wonder how much tax incentives and building subsidies many of these builders were offered for rampant housing production cost the taxpayer.
Click here to read the full article.
January 11, 2008
Filed under: Foreclosure, Mortgage Industry Trends, Quality in Lending — admin @ 5:25 pm
Ruth Lee
Over the last few months, it is hard not to notice all of the gleeful hand-rubbing and “I-told-you-so-ing,” as disgruntled ex-employees, ex-insiders and ex-originators Monday morning quarterback the potential demise of one of the country’s largest lenders. The Implode-o-meter forums froth with idle comments from bored survivors, with a few fantastic exceptions. The fact is that no one hit the meter because Countrywide’s mean old underwriters didn’t accept your trumped up appraisal… the industry hasn’t lost its potency over extended underwriting or closing turntimes… (In fact, many would argue that the push for volume over quality was instrumental in the collapse.) Even the more egregious slights, like the ones they are going to court over, well, they just weren’t the fulcrum either. The reason that we are in trouble is simple: there are many homeowners that cannot pay their mortgage and foreclosure is BAD for business.
There are a thousand reasons why homeowners can’t pay their mortgage: some chose poor loan products, others were coerced into them, many bought houses they couldn’t afford, real income is declining, productivity is increasing causing manufacturing jobs to evaporate, the value of the dollar is falling, Katrina, rising health care costs, Wall Street made some bad calls on the whole underwriting thing. One of the main reasons I would argue: we have not been compelled or incented to save; we are incented to spend. In our consumer climate, if you can’t become an millionaire in America; being a “Visa”nairre is almost as good.
Investors relied on the stability of the American mortgage; real property as collateral, a track record of strong repayment and a well-established rule of law. But, as that same collateral depreciates, the track record erodes into a Cliff’s Notes of bad assumptions and worse performance, and regulators scramble to respond with ham-fisted alacrity, those enticements are gone…leaving a sudden desire to invest in anything that doesn’t have the word mortgage in the title. Without investors, we have less liquidity. Without liquidity, loans must compete for those dollars…and guess which ones are winning…definitely not the wage-earner stated, pay option ARM on a non warrantable igloo in downtown Miami.
I am not an apologist for Countrywide; frankly, I am just a practical, steely-eyed capitalist. There is a true link between the demise of an institution the scope and size of Countrywide and investor confidence in the industry as a whole. Since investor confidence is a key factor in how we are going to rebound, and many of us still in the industry need the rebound sooner than later, I am hoping that they are able to recover and flourish. I finally understand the impulse for bailouts and intervention. Whatever the response, we need action. We need resolve to adapt and respond to our investors. Neither their family nor mine can eat “I told you so.”
