Beach To Bay Real Estate Center

Home prices may plummet, but taxes won't

2008-10-17T06:29:00.002-07:00

Owners who've seen a steep drop in their home's value shouldn't expect to get a break on their property taxes.

By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 2:48 PM ET

NEW YORK (CNNMoney.com) -- Housing prices have plummeted, but property tax bills probably won't budge.

This January, local tax authorities will begin to send out property assessments for 2009, telling homeowners what their property is valued at, and how much their tax bill is.

But many assessments won't reflect any of the steep home price declines that have been making headlines for the last year or so.

And even if property assessments do drop, property tax bills won't necessarily be any lower.

"I think you're going to see a lot more taxpayer protest this year," said Bruce Hahn, president of the American Homeowners foundation, a non-partisan consumer advocacy group.

A huge runup slows
Property taxes climbed relentlessly earlier this decade as home prices rose, according to Pete Sepp, spokesman for the National Taxpayers Union. This year Americans will pay more than $400 billion in property taxes, up about 25% from levels in 2004 and double what they paid ten years ago.

At best, says Sepp, those steep increases may start to level off.

Nevertheless, homeowners are already pressing assessors for lower tax assessments.

"For my first 25 years [as an assessor], nobody ever asked me to lower the assessment based on a home selling for less down the street. There are many such inquiries this year," said Ken Wilkinson, the tax assessor for Lee County Fla., which includes Cape Coral and Ft. Myers.

He estimates that 80% of county residents have seen the value of their homes decline. The median price of existing homes fell more than 25% in the 12 months ending June 30, according to the Housing Opportunity Index compiled by Wells Fargo (WFC, Fortune 500) for the National Association of Home Builders.

Home prices in Moreno Valley, Calif. a city of 187,000, have fallen by more than a third over the past two years, according to the same index. And that has many more homeowners clamoring for reassessments, according to Barry Foster, the city's economic development director.

But even if local prices are way down, taxpayers may not win a lower assessment, because there can be a big lag time between when the home sales used to calculate them take place and when the assessment is actually issued.

To calculate 2009 assessments, for example, assessors will use home sale prices from 2008 or even earlier, according to Sepp. Usually this works to taxpayers's advantage, since price increases take a while before they are fully reflected in assessments.

That's why it's typical for most homes to be under-valued, according to Bruce Hahn of the American Homeowners foundation. But that's also why many homeowners aren't likely to see their assessments shrink immediately.

Lower values, same bill
There's another reason why homeowners are unlikely to see any decrease in property tax bills. In some states, such as California, Washington State, Massachusetts and Idaho, taxes are based on the last resale price of the house. Even a home worth $500,000 in California may be taxed based on the sale price when it was bought 10 years earlier for $200,000.

"Because the assessment is based on acquisition value, it's difficult to get that re-evaluated," said Sepp.

That's why the market value of most homes in these states exceeds the assessed tax values. The owners with best case for a reassessment are the ones who bought at the top of the market and have seen their values drop by a third or more, like many of Moreno Valley's residents.

Even if citizens do receive a lower assessment - and this year Wilkinson expects to lower assessments for most taxpayers in Lee county, Fla., by 20% or more - their property tax bill may not shrink at all.

Tax collectors often raise tax rates to offset lower assessments to meet their budgets, which will be very strained this year. Assessments go down but rates go up so that the tax collections stay roughly the same.

"State and local governments depend very heavily on real estate taxes and they are reeling from a loss of revenues from sales taxes and other sources," said Bruce Hahn.

Once homeowners get their bills, they'll have several weeks to contest their assessments, according to Hahn.

He suggested they go online to real estate evaluation sites such as Zillow.com to determine how far property values have fallen in their communities. They can also cite comparable home sales for similar properties to make their cases.

"Some tax assessors have been very reasonable," said Hahn, "but others are under great pressure to keep revenues up."

Homebuilders: Confidence falls sharply

2008-10-17T06:29:00.001-07:00

The National Association of Home Builders blames the financial crisis for the new low.

Last Updated: October 16, 2008: 2:18 PM ET

LOS ANGELES (AP) -- The business outlook among homebuilders plunged to an all-time low this month, as the U.S. financial crisis further sapped their confidence in a near-term housing market recovery, an industry trade association said Thursday.

The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled three points to 14 in October. The index stood at 17 in September after registering a one-point increase in August.

Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.

The Washington-based association said the latest builders' survey reflects its members reaction to the financial woes on Wall Street, rising unemployment and weakness in consumer confidence.

The group called on lawmakers to enact an economic stimulus package with incentives for homebuyers.

"The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession," NAHB Chief Economist David Seiders said.

Builders have been hurting from the combination of falling home prices, less demand for new and preowned homes, tighter lending standards and a torrent of foreclosed properties competing for buyers.

Major public builders such as D.R. Horton Inc. (DHI, Fortune 500), Lennar Corp. (LEN, Fortune 500), and Toll Brothers Inc. (TOL, Fortune 500), have seen their stocks hammered as housing woes have deepened.

A housing stimulus package signed into law by President Bush this summer failed to spark the kind of home buying spree many builders had hoped for. Some major builders have said the plan's temporary $7,500 tax credit for first-time home buyers was ill-conceived because it essentially worked out to a 15-year, interest-free loan.

Some builders also decried the cancellation this month of programs that let sellers channel down payment money to cash-strapped home buyers via charities. The programs were eliminated by Congress because homebuyers who used them had high default rates.

The latest index marks deepening pessimism among builders in just a few weeks. Last month, the trade association's president, Sandy Dunn, waxed far more optimistic, remarking that builders were sensing home sales were nearing a turning point.

At the time Seiders projected sales would likely stabilize by year-end.

Builders' October survey responses reflected a far less rosy outlook.

Their gauge of current sales conditions fell three points to 14, traffic by prospective buyers dropped two points to 12, and sales expectations over the next six months plunged nine points to 19, the NAHB said.

Declines in builder confidence were seen across the United States, with the biggest drops in the Northeast and South, where confidence declined by four points.

The index reflects a survey of 446 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.

Shares of Fort Worth, Texas-based D.R. Horton fell 62 cents, or 8.5%, to $6.70 in morning trading Thursday.

Miami-based Lennar's shares were down 53 cents, or 6%, to $8.23, while shares of Toll Brothers were down $1, or 5.4%, to $17.62.

Mortgage rates spike - leap size tops '87

2008-10-17T06:21:00.002-07:00

Rates saw the biggest weekly jump since 1987 - analysts predict 30-year fixed mortgage rates will climb higher, and pin the hike on government rescue efforts.

By Les Christie, CNNMoney.com staff writer
Last Updated: October 16, 2008: 6:22 PM ET

NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on a rapid rise.

Freddie Mac reported Thursday that the average 30-year fixed-rate mortgage has hit 6.46% - up from 5.94% the week earlier. That represented the largest weekly increase since April 1987, when the 30-year rose 0.84 points.

Bankrate.com also charted the spike. The investment Web site reported that the average interest rate on a 30-year, fixed-rate mortgage jumped to 6.74% on Wednesday from 6.2% the Wednesday before.

Translation: A borrower with a $200,000 mortgage would pay about $1,225 a month at 6.2%, and $70 more, $1,295 at 6.74%.

Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.

That would be quite a bit higher than rates have been, but it's no disaster.

Keith Gumbinger of HSH Associates, a publisher of mortgage information, attributes the rate increase to the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.

"Who even has the cash to buy them all?" he said. "The Treasury has to offer higher interest rates to sell."

And mortgage rates tend to move in conjunction with those 10-year Treasury yields, which rose rapidly during the past week, up to more than 4% Wednesday from below 3.5% the week before.

The spread - the difference between Treasury yields and mortgage rates - also expanded a bit, according to Bankrate.com.

Unintended consequences
There may be another factor at work sending rates skyward, according to FTN Financial Group analyst, Jim Vogel.

The cost of financing mortgages will grow for the biggest buyers of mortgage debt, Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), thanks to the plan for the Federal Deposit Insurance Corp. to back the newly issued, unsecured debt of some banks.

By guaranteeing bank debt, the government is making that debt more attractive for investors, and consequently creating more competition for Fannie and Freddie when they look to sell their own securities. To compete for buyers, the mortgage giants will have to raise their own yields - and to pay for that they'll have to charge borrowers higher interest.

"In theory, I think that could be correct," said Mark Zandi, chief economist for Moody's Economy.com, who is also an adviser to John McCain's presidential campaign. "But in practice, whether it means that rates will rise is an open question. There's a strong demand for really safe assets these days and Fannie and Freddie bonds are just a step removed from Treasurys."

If there's enough demand for ultra-safe investments like Fannie and Freddie bonds, Zandi says, they may not have to boost their yields all that much to attract investors.

Zandi pointed out that the difference between Treasury yields and 30-year mortgage rates is very high right now, more than 2% compared with 1.5% normally. That's because investors fled to risk-free Treasurys when the markets panicked.

But eventually, he says, the government rescue may send mortgage rates down and narrow that spread. "If that helps bring down the general angst, than mortgage rates should fall," he said.

Gumbinger expects rates to stay higher for several more months, as financial markets and lending take some time to return to normal. But he doesn't see the current spike as the beginning of the end of affordable mortgages.

"Rates should probably settle back down," he said. "We should see an easing of credit availability and that should put downward pressure on rates."

Commercial Briefs

2008-10-17T06:21:00.001-07:00

MBA (10/13/2008 ) Murray, Michael
Centerline Capital Group, a New York-based commercial real estate investor, and ZAIS Group, a Red Bank, N.J.-based structured products manager, formed a new venture to pursue investments in the commercial mortgage-backed securities market. ZAIS Group spoke last summer with Centerline about co-investment opportunities. Both firms said attractive opportunities exist in the commercial real estate debt markets.

The new venture would allow Centerline to "deploy the capital necessary to realize the high-quality investment returns still available in the current marketplace,” said Mark Brown, senior managing director and head of CMBS and commercial products business group at Centerline Capital Group.
John Jardine, managing director at ZAIS Group, said the CMBS sector provides some of the best risk-adjusted returns in the commercial real estate investment market. “We believe the appropriate strategy is to focus on private, 144a securities, conduct a fundamental re-underwriting of every asset within a loan pool and leverage Centerline’s proprietary systems, exchanging real-time asset and market information with our servicing partner,” Jardine said.

CMBS Delinquencies Consistently Rising

2008-10-17T06:19:00.002-07:00

MBA (10/13/2008 ) Murray, Michael
Loan delinquencies in commercial mortgage-backed securities were up nearly 13 basis points after the first three quarters of this year to 0.52 percent—0.58 percent excluding defeasance loans, based on numbers from Citigroup Securities, New York.

CMBS delinquencies seem to be increasing each month as the credit crisis starts feeding into the general economy, said Darrell Wheeler, head of CMBS at Citigroup.

“The lack of new supply is also leading to a net run-off of outstanding balance, which would tend to raise the headline delinquency rate," Wheeler said. "However, the rate still remains low for now when compared to historical delinquency rates, and dramatically different from the high rates of the subprime residential market. If the economic slowdown is prolonged, we expect to see rising delinquency rates from these low levels, possibly to the 1 percent to 1.5 percent range in early 2009 and 2 percent to 3 percent sometime in 2010.”

However, Realpoint LLC, Horsham, Pa., said more than 35 percent of delinquent unpaid balances in CMBS through August came from transactions issued in 2005-2006 vintages, and more than 20 percent of all delinquencies were found in 2006 transactions.

With 13 percent total delinquency included in the 2007 vintage, more than 48 percent of CMBS delinquency in August came from 2005-2007 vintage transactions, Realpoint's research said.

Nearly 1.4 percent of 65,028 CMBS loans in Citigroup’s universe included delinquencies of 30, 60 and 90 days, one foreclosure and loans for special servicing. They accounted for more than $10 billion out of a total of more than $714.7 billion. Citigroup’s CMBS universe consists of publicly issued, fixed-rate CMBS conduit, fusion, lease-backed, large loan and seasoned loan transactions.

After five straight months of increases, Realpoint showed August’s delinquent unpaid balance for CMBS dropping slightly to $4.07 billion through from a trailing 12-month high of $4.203 billion through July. Special servicing exposure, however, increased to $6.88 billion in August from $6.45 billion in July for $10.95 billion in delinquencies and special servicing.

Total unpaid balance for all CMBS pools reviewed by Realpoint was $862.6 billion in August, down from $863.6 billion in July, with August's delinquency ratio at 0.47 percent, down slightly from 0.49 percent in July and 0.48 percent in June.

"What is more concerning, however, is that the delinquency percentage through August 2008 is up 18 basis points or 62 percent above the 0.29 percent reported one-year prior in August 2007. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflect a slow but steady increase from historic lows through mid-2007," said Frank Innaurato, managing director at Realpoint.

CMBS delinquency by unpaid balance increased 29 percent from January’s $3.16 billion and up 84 percent from a six-year low of $2.21 billion in March.

“While both the 30-day and 60-day delinquent loan categories decreased, the distressed 90+-day, foreclosure and REO categories grew for the ninth straight month—up 43 percent since January 2008,” Innaurato said.

Delinquencies also increased in August along with $70.7 million in liquidations reported across 18 loans. Liquidation activity slowed after increases in June and July, due to slowdown from the current credit market climate.

“We expect that these high liquidations, however, are a clear response to increased loan workout and delinquency pressures being placed on special servicers, and may be a precursor to increased distressed asset money returning to the market,” Innaurato said.

Based on Realpoint’s numbers for August, highest loss severities in 2007 were found in industrial and healthcare collateral while multifamily collateral was highest by balance before liquidation. Citigroup showed multifamily as the only sector with current elevated delinquency rates at 1.6 percent in September.

“We recently wrote about the issues facing apartments under rent controls that were aggressively underwritten assuming conversion rates that have not materialized,” Wheeler said.

CMBS delinquencies in Michigan remained elevated at 2.50 percent as the domestic auto sector continued to struggle, but Tennessee and Georgia showed a spike in their rate during September as well, Citigroup said.

Texas, Florida and Michigan—the top three states ranked by delinquency exposure for the past 10 months through August—collectively accounted for 39 percent of CMBS delinquencies, based on Realpoint's research.

Residential Briefs

2008-10-17T06:19:00.001-07:00

MBA (10/13/2008 ) Palaparty, Vijay
Freddie Mac Suspends Foreclosures Hurricane in Ike Areas
Freddie Mac, McLean, Va., ordered servicers to suspend all foreclosure sales on properties with Freddie Mac-owned mortgages in federally declared disaster areas caused by Hurricane Ike in Texas and Louisiana. The suspension will extend from October 8 to December 31 and include mortgages that were in default prior to Hurricane Ike.
Servicers will be required, after the suspension ends, to consider individual circumstances in determining whether to extend additional foreclosure relief or to proceed with foreclosure. The announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes that were declared federal disaster areas and where federal aid in the form of individual assistance is available.

HUD Hosts Regional Housing Summits
HUD will host three regional housing summits across the country to help launch HUD's new Neighborhood Stabilization Program. It will invite state, city and county leaders to address the country's urgent and long-term housing issues including how to deal with abandoned foreclosed properties within their communities. The summits will take place on October 10 in Los Angeles; October 14 in Columbus, Ohio; and October 16 in Orlando.

Declining Economy Puts Brakes on Remodeling

2008-10-17T06:17:00.002-07:00

MBA (10/13/2008 ) Palaparty, Vijay
Remodeling activity among homeowners declined 15 percent this year—mostly in areas where homeowners have less equity—according to a report from Remodelormove.com, Sunnyvale, Calif. Eighty-four percent of respondents said possibility of a recession affected their remodeling plans.
Homeowners reported an average of $190,000 in home equity and average home value of $390,000—up by $140,000 and $342,000 respectively. The report, 2008 Remodeling Sentiment Report, corresponded with the U.S. Remodeling Permit Activity Report, also from Remodelormove.com, which showed an increase in the average cost of a remodel in markets with most expensive homes and a decrease in regions with average- and below average-priced homes.

“Homeowners who choose to remodel their homes may find this a good time,” said Dan Fritschen, real estate author and principal researcher. “With new home construction at low levels, more materials and labor are available for remodeling than several years ago, resulting in shorter project schedules and often lower project costs.”

Eighty-one percent of respondents said they plan to start their home remodel this year nonetheless.

Decline in home equity line of credit originations could be one reason for the slowdown. Benchmark Consulting International, Atlanta reported a 26.4 percent decrease in HELOC originations between the first and second quarters among small/medium-sized lenders. Applications decreased 33.8 percent, though from a book-to-look perspective, borrowers' interest found renewal in the second quarter, with the rate rising by 5 percent to 49 percent from 44 percent in the first quarter.

“With tightening of credit standards, tougher underwriting guidelines and less direct marketing focus, it is understandable why applications are down so significantly,” said Brian King, senior vice president at BenchMark Consulting.

In July, Harvard University’s Joint Center for Housing Studies reported a decline at an annual rate of 11.1 percent in home improvement activity.

Nicolas Restinas, director of the Joint Center for Housing Studies said the slumping economy and struggling housing sector will drag spending on home improvements. “Households are reluctant to undertake major improvements in the context of falling prices,” he said.

McGraw-Hill Construction, New York, however, reported that building green is advantageous, even in a down market. Forty percent of builders reported that building green eases marketing; 16 percent said it is much easier.

“Green building has definitely reached its upper tipping point,” said Harvey Bernstein, vice president of industry analytics, alliances and strategic initiatives at McGraw-Hill Construction. “Builders can no longer ignore the market advantages of green building. Especially considering today’s market and current economic situation, builders need to differentiate themselves from their competitors and hold steady or prosper in the down economy. Green building gives builders opportunity to expand their market share and ride out this economic slump.”

In 2009, 21 percent of builders expect 90 percent of projects to be green and that 60 percent of homebuyers will pay more for green homes.

Financial Turmoil Continues Unabated

2008-10-17T06:17:00.001-07:00

MBA (10/13/2008 ) Velz, Orawin
Equity markets around the globe hemorrhaged as the problems in the financial system threatened to cause a global recession. Commodities (including energy and agriculture products) were in free fall over the fear that a worldwide recession will lead to flagging demand. Crude oil futures fell below $80 a barrel on Friday, the lowest in a year.
Another week brought more fiscal and monetary policy actions to tackle the financial crisis. On Tuesday, the Federal Reserve made an unprecedented move to alleviate the frozen commercial paper market, which has shrunk for the fourth consecutive week. The Fed announced creation of the Commercial Paper Funding Facility to backstop issuers of the short-term debt used by many businesses to meet daily needs. The special-purpose vehicle will purchase three-month unsecured and asset-backed commercial paper. This essentially enables the Fed to lend directly to businesses rather than to just financial institutions.

On Wednesday, as a part of a coordinated effort by major central banks around the globe, the Fed cut the federal funds rate by 50 basis points. The Fed cited weakening economic activity and intensified financial market turmoil as a motive of this inter-meeting rate cut. (The next Federal Open Market Committee meeting will be on October 28-29 and fed funds futures expected a further rate cut then).

In his speech on the same day, Treasury Secretary Henry Paulson Jr. suggested the possibility of injecting capital directly into financial institutions and, in effect, partially nationalizing those institutions. The Treasury maintained that the Emergency Economic Stabilization Act gave it the authority to provide capital in exchange for ownership stakes.

These actions failed to inspire investor confidence. Banks still did not trust each other and were reluctant to lend to one another, which resulted in rising borrowing costs for interbank lending. The London interbank offered rate continued to climb on Friday, with the three-month Libor rising to 4.82 percent—the highest since late December 2007.

Economic data were sparse last week. The first drop in August consumer credit outstanding in 10 years underscored households’ concerns about their finances and pointed to a retrenchment in consumer spending ahead. The trade deficit in goods and services narrowed in August but its improvement was not a result of strong overseas demand for U.S. products, as both exports and imports fell. One housing report offered some good news: pending home sales surged in August, fueled by pending sales (i.e., contract signing) of distressed properties in the West, suggesting existing home sales (closing) may rebound in the near term.

Stock markets extended their decline into an eighth day Friday. Investors continued to shift money into safe-haven assets, especially short-term Treasuries. The yield on the three-month Treasury bill plunged to 0.18 percent from 0.52 percent on Thursday. Longer-term Treasury yields did not benefit from a flight to quality and moved higher throughout the week. The yield on the 10-year Treasury note stayed around 3.87 percent mid-Friday afternoon, 38 basis points higher than the rate at the start of the week and 23 basis points higher than the rate on the previous Friday.

Housing and Mortgage Indicators:
The National Association of Realtors Pending Home Sales Index surged 7.4 percent to 93.4. The index was up 6.8 percent from last August, the first year-over-year increase since September 2005.

Pending home sales increased in every region of the country, led by an 18.4 percent increase in the West. The relatively stronger performance of existing home sales for the region partly reflects rising shares of foreclosed and distressed homes that were sold through the Multiple Listing Service. Attractive bargain prices have helped lure some buyers back into some local markets.

Pending home sales also rose strongly by 8.4 percent in the Northeast and rose modestly in the Midwest and the South by 3.6 percent and 2.4 percent, respectively.

The index is based on signed contracts for existing single-family homes, condos and co-ops. It is a leading indicator of NAR’s existing home sales, which are based on closings, as the signed contract for the purchase of a home generally precedes its closing by one to two months. The increase in June pending home sales suggests that existing home sales should increase in the near term.

Economic Indicators:
Total consumer credit outstanding fell $7.9 billion in August to $2.57 trillion—the largest decline in the level of consumer credit on record. The measurement of consumer credit does not include any loans secured by real estate. Revolving credit balances fell $600 million, while nonrevolving credit dropped $7.3 billion or 5.3 percent—the largest percentage decline since 1992, driven by a sharp drop in new vehicle sales.

The U.S. trade deficit narrowed to $59.1 billion in August from $61.3 billion in July. Exports decreased by 2.0 percent to $164.7 billion in August, while imports decreased by 2.4 percent to $223.9 billion.

Import prices declined 3.0 percent in September, the second consecutive decline and its largest since the 2003. Over the year, import prices were up 14.5 percent, decelerating from the 18.7 percent increase in August.

Prices for petroleum products declined 9.3 percent. Import prices excluding fuels fell 0.5 percent, the first month-to-month decline since February 2007.

GSEs Still a Good Thing, Ranieri Says

2008-10-17T06:15:00.002-07:00

IDD Magazine (10/06/08); Rozens, Aleksandrs
Speaking before senior home builder executives at Harvard University's Joint Center for Housing Research on Oct. 2, Hyperion Partners Chairman Lewis Ranieri--an early pioneer of mortgage securitization--emphasized the importance of Fannie Mae and Freddie Mac in rebuilding the mortgage market. Ranieri said the structure of the agencies needs to be made "more responsible," however, and insisted that the agencies must maintain their government guarantee without the government assuming too much of their risk. He suggested a structure similar to the Federal Home Loan Bank system, in which lenders would purchase a stake in Fannie Mae and Freddie Mac while the government charges a fee to guarantee the securities. To bolster the mortgage market, Ranieri also recommended using covered bond structures, altering risk-based capital requirements on agency debt and beefing up regulation of the credit default swaps market.

Consumers' Credit Getting Not So Easy

2008-10-17T06:15:00.001-07:00

Dallas Morning News (10/13/08)
More people were able to purchase homes as credit was expanded over the past three decades, but experts now believe it will become more difficult to borrow money for a prolonged period. The credit crunch means that prospective home buyers may no longer be able to purchase homes with interest-only loans or obtain loans that allow them to borrow more than the value of the property. Home buyers will need to make substantial payments and down payments, and they also may face higher interest rates; while borrowers across the board will find it more difficult to open a credit card and carry large balances. "This entire credit crunch is a wakeup call to anybody who was attempting to borrow their way to prosperity," says Greg McBride, senior analyst at Bankrate.com.

5,000 Show Up at Foreclosure Showcase in Uniondale

2008-10-17T06:13:00.002-07:00

New York Newsday (10/13/08); Amon, Michael
The New York Foreclosure Showcase drew a crowd of almost 5,000 to the Marriott Hotel and Conference Center in Uniondale on Oct. 12, when 35 foreclosed properties were put on the auction block. The current market has afforded "opportunities to buy that didn't exist before," says Todd Yovino of Island Advantage Realty, who organized the event. Bidders needed to arrive with a mortgage prequalification and a certified check for $10,000. On hand to speak with attendees were realtors specializing in foreclosures, real estate attorneys and home improvement specialists; and they also had access to seminars on mortgage prequalification and quick foreclosure sales.

NAHB: Housing Jobs Key to State and Local Economic Recovery

2008-10-17T06:13:00.001-07:00

RISMedia (10/13/08)
National Association of Home Builders Chairman Sandy Dunn urges state and local governments to consider innovative ideas to help shore up the slumping housing market. Dunn remarks, "While the federal government has stepped forward with a series of emergency actions to stabilize and restore confidence in the financial markets, it's now time for the same sort of innovative thinking at the local and state levels where public officials are grappling with budget shortfalls that are putting a squeeze on spending for everything from schools to public safety and other essential services." Such creative thinking could range from temporarily foregoing impact fees on new development to allowing higher density zoning to build more affordable housing. Dunn concludes that it is also vital that cities and counties extend existing zoning approvals while builders secure financing for new projects.

Paulson Speeds Consideration of Guarantees for U.S. Bank Debt

2008-10-17T06:12:00.001-07:00

Bloomberg (10/13/08); Christie, Rebecca; Schmidt, Robert
U.S. Treasury Secretary Henry Paulson Jr. reportedly is fast-tracking a plan to guarantee debt issued by banks after a similar move was made by European policy makers over the weekend. Such a step would be part of a three-pronged strategy to free up credit markets that also calls for the government to buy shares in financial companies and invest in distressed assets under the $700 billion program recently approved by Capitol Hill lawmakers. In order to keep a level playing field for American lenders, the Treasury may also have to offer a backstop for U.S. banks' debt. At an emergency summit in Paris on Oct. 12, European leaders agreed to offer guarantees for new bank debt and committed to using taxpayer funds to bolster lenders' capital.

Fannie Reaches Out to FHLBs

2008-10-17T06:11:00.000-07:00

National Mortgage News (10/13/08) Vol. 33, No. 4, P. 15; Collins, Brian
Fannie Mae will purchase mortgages originated under the Federal Home Loan Bank of Chicago's Mortgage Partnership Finance program by its member banks. These MPF Xtra loans will not involve the program's trademark credit-risk sharing element once sold to the government-sponsored enterprise, however. Chicago FHLBank President Matt Feldman says the initiative "will make it easier for the majority of our members to continue to offer competitively priced fixed-rate mortgages to their customers in their communities." Fannie Mae will assume the member banks' interest rate risk, prepayment risk and credit risk, while the banks hang onto servicing rights and servicing fee revenues.

Fannie, Freddie to Step Up Purchases of Troubled Mortgage Bonds

2008-10-17T06:05:00.000-07:00

Bloomberg (10/13/08); Kopecki, Dawn
Insiders say Fannie Mae and Freddie Mac will begin buying $40 billion a month in underperforming mortgage bonds, including subprime, Alt-A and non-performing prime mortgage securities. The purchases are not tied to the U.S. Treasury's $700 billion Trouble Asset Relief Program. The mortgage finance companies have not turned a profit this year and already hold up to $210 billion of bad debt, but the Federal Housing Finance Agency says the Treasury might be able to purchase some of that debt. "The overall goal of the program will be to contribute greater stability and liquidity in the mortgage market, which should enhance consumers' access to mortgage financing and ultimately result in reduced mortgage interest rates," FHFA Director James Lockhart said in a statement in September.

Take a bite out of closing costs

2008-10-17T06:04:00.001-07:00

Hold the fees please. How to save if you're buying a new home or just refinancing.

BEND, Ore. (CNN/Money) - With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?

Not if you pay a fortune in closing costs.

As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.

Click Here for the full article

Mortgage aid program launches

2008-10-17T05:57:00.002-07:00

The $300B initiative will help borrowers who spend more than 31% of their income on mortgage payments.

WASHINGTON (AP) -- The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.

Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.

Click Here for the full article

Mortgage rates slip to 5.94%

2008-10-17T05:57:00.001-07:00

NEW YORK (CNNMoney.com) -- Rates on 30-year mortgages fell from last week, while loan applications grew slightly in the face of turbulence in the banking and finance sectors.

Mortgage finance firm Freddie Mac (FRE, Fortune 500) reported Thursday that 30-year fixed-rate mortgages averaged 5.94% this week. That's down from 6.10% last week and well below 6.40%, where the rate stood a year ago.

"Longer-term mortgage rates fell for the first time in three weeks, roughly following bond market yields," said Frank Nothaft, Freddie Mac vice president and chief economist.

Click Here for the full article

Economic Crisis Dims Manhattan Office Forecast

2008-10-16T12:17:00.001-07:00

MBA (10/10/2008 ) Murray, Michael
Manhattan office vacancies could fluctuate negatively following Barclays Bank's acquisition of several Lehman Brothers business units, Bank of America's acquisition of Merrill Lynch, events at AIG and other economic issues.
In a New York office forecast report, Property and Portfolio Research, Boston, said Lehman's office space could remain occupied because of Barclay's acquisition. PPR reported that Lehman Brothers occupies nearly 3.4 million square feet of office space in the New York metro, including a one million square-foot building it owns at 745 Seventh Avenue, based on recent filings with the Securities and Exchange Commission.

"In the modified base case scenario, the addition of 3.4 million square feet of vacant space to the New York office market would exacerbate an already dismal demand picture for 2008, resulting in negative net absorption of 11.4 million square feet for the year," PPR said.

In an alternate “upside” scenario that assumes Lehman vacates only half of its office space [1.7 million square feet], PPR said vacancies could reach 12.4 percent in the third quarter. “In this case, the 'upside' would still result in a vacancy rate that is 220 basis points above year-ago levels, and rent projections would remain negative through 2009. But this scenario wouldn't count likely job losses in other financial firms and knock-on effects in the market."

Bank of America's acquisition of Merrill Lynch also leaves questions; PPR reported that New York "may again bear the brunt of any downsizing, and given that Merrill occupies nearly as much space [3.2 million square feet] in the metro as Lehman did, there could be much more pain on the way."

In a worst-case scenario of further economic troubles, PPR estimated job losses in financial activities at nearly 75,000—peak-to-trough—based on severe recessionary economic conditions, compared to nearly 40,000 cuts in the base case, or moderate recession, forecast.

"The health of the financial sector is highly correlated with the health of the overall New York economy, so heavy financial losses would carry through to other job sectors, bringing total metro unemployment close to 11 percent," PPR said. "These conditions would yield substantial negative net absorption—carrying into 2010—and a vacancy rate in the high teens, similar to levels reached in the early 1990s. Rent losses in this scenario would stretch on through 2011, with 2009 and 2010 as the worst years—contracting by 13 percent and 9 percent, respectively, and values would scale back by over 13 percent through 2009."

MBA Conducting Member Survey

2008-10-16T12:16:00.001-07:00

MBA (10/10/2008 ) Pardo, Sheryl
The Mortgage Bankers Association is conducting a brief survey about what MBA members value most in their membership.
“In a time of limited resources, we must ensure that MBA is focusing its efforts on [members] top priorities,” said MBA Chief Operating Officer John Courson. “Only by knowing what you value most can we ensure that MBA is best supporting your company during these turbulent times.”

The survey takes less than 15 minutes to complete. It asks questions about why members choose to belong to MBA; which products, services and issues are of most importance to members, and where MBA can improve.

The survey will be distributed this week; responses are due Oct. 15.

Future SaaS Development Invites Customers into Cloud

2008-10-16T11:47:00.002-07:00

MBA (10/10/2008 ) Palaparty, Vijay
Software-as-a-service’s future will expand on customer/vendor partnerships, in which vendors provide programmable platforms that yield customized technology for customers.

The model presents opportunities for customers to guide their own development, while expanding vendor offerings.
“Future trends in SaaS include the ability to provide customer-driven software development,” said David Hultquist, vice president of marketing at Dorado Corp., San Mateo, Calif. “No software vendor can have everything but technology-wise, it will become a future need of SaaS. Customers will require classical benefits such as the ease of use in a monthly subscription format, but will also demand having benefits of customization.”

London-based web hosting provider Hostway said in a recent study that 72 percent of organizations believe virtualization will drive SaaS adoption. Furthermore, two-thirds of organizations reported plans to adopt SaaS within the next five years.

"SaaS reduces overall software license spending for larger companies, while helping smaller companies adopt enterprise-level software without the large upfront investment or the need to train staff to manage and monitor applications," Hostway said. A further 72 percent of companies are certain that SaaS will make their application usage more cost-effective because of reduction in software management costs, and the ability to eliminate buying too many or too few software licenses.

"Furthermore, around half of all organizations believe that it will enable smaller companies to use enterprise-level software without the need for large upfront investment, or having to train staff to manage and monitor these applications," said Neil Barton , director of Hostway. "Given these benefits, it is unsurprising that two-thirds of organizations are planning to adopt SaaS within five years."

Hultquist said benefits of SaaS include vendors' ability to better project revenue streams and business, helping companies realize cost benefits. He said the adaptability of SaaS can more appropriately respond to market fluctuations.

“Years ago we had to do a lot of education against a built-in bias among companies that said they require all technology to be in-house," Hultquist said. “That has changed quite a lot, and we’ve observed not completely universal but growing awareness of SaaS and its benefits. The overwhelming advantages of setting up and running quickly compensates for the lingering feeling that some companies want all software in their own control.”

To deal with such reservation, along with a slow business market, companies such as Dorado have revised their marketing strategies to acquire customers in a piecemeal approach.

“We are helping companies in a phased approach in which they can move part of the business to our technology and ramp up over time," Hultquist said. "They realize quicker ROI this way and can do that without having to take an entire year to make one great big decision. The ROI will demonstrate itself.”

From a data management perspective, Hultquist said SaaS vendors are better able to meet customer requests in both managing and securing data as well as running data and formatting it as requested. “Meeting the changing regulatory landscape is a good example of companies requesting data in different formats—even management reporting,” he said.

HUD Program to Buy Foreclosures

2008-10-16T11:47:00.001-07:00

Miami Herald (10/10/08)
HUD's Neighborhood Stabilization Program providing state and local governments with a total of $4 billion to buy foreclosed and abandoned properties to curtail blight and bolster homeownership will be launched at an Oct. 16 summit in Orlando. The money will be distributed to areas devastated by the housing crisis, with Florida awarded $541 million. Under the plan, foreclosed homes could be transformed into affordable rentals or for-sale dwellings.

Foreclosure Sales Halted in Hurricane-Hit Areas

2008-10-16T11:44:00.002-07:00

Washington Post (10/10/08) P. D4
Through Dec. 31, mortgage servicers may not proceed with foreclosure sales in areas of Texas and Louisiana classified as federal disaster areas due to Hurricane Ike. Freddie Mac says mortgages in default before the storm also are covered by the firm's mandate. Servicers will consider on a case-by-case basis whether to move forward with foreclosure or offer more relief once the moratorium ends.

Mixed Signals for Mortgage Giants

2008-10-16T11:44:00.001-07:00

Washington Post (10/10/08) P. D2; Goldfarb, Zachary A.
Despite a June report that Fannie Mae and Freddie Mac had $9.4 billion and $2.7 billion more capital, respectively, than its regulator requires, the Federal Housing Finance Agency has deemed the companies undercapitalized due to the mortgage crisis and increasing concerns about safety and soundness. The agency indicates that intangible assets, such as tax credits, accounted for a substantial amount of the firms' capital and that capital is no longer an accurate gauge of financial health. University of California at Berkeley finance professor Dwight Jaffee says Fannie Mae and Freddie Mac were unable to generate capital by issuing new stock following comments made by Treasury Secretary Henry Paulson prior to their takeover that government intervention "would be sure to wipe out the shareholders." Jaffee says the government hopes the companies will help the housing market recover, noting that such a move "may involve taking more risks than they would ordinarily do and accepting a lower return on the assets than they normally do."

Commercial Realty: Market Bright Spot

2008-10-16T11:20:00.003-07:00

American Banker (10/10/08) P. 13; Berry, Kate
According to Advantus Capital Management Inc.'s third-quarter economic update, commercial real estate remains one of the stock market's better-performing sectors. The Minnesota-based investment adviser's relatively bullish view of commercial property was based on a 4.5-percent increase in the Dow Jones Wilshire Real Estate Securities Index, which outperformed the Standard & Poor's 500 Index in the third quarter this year. Advantus noted in its report that commercial real estate funding typically is long term, "insulating it from current stresses in short-term credit." Although the fundamentals of the commercial sector are currently "solid," a braking economy would likely put pressure on certain properties, like hotels, where income is not derived from leases and other longer-term instruments.