Foreclosure abuse rampant
A report this week showing rampant foreclosure abuse in San
Francisco reflects similar levels of lender fraud and faulty
documentation across the United States, say experts and officials
who have done studies in other parts of the country. The audit
of almost 400 foreclosures in San Francisco found that 84% of
them appeared to be illegal, according to the study released by
the California city on Wednesday. "The audit in San Francisco is
the most detailed and comprehensive that has been done - but it's
likely those numbers are comparable nationally," Diane Thompson,
an attorney at the National Consumer Law Center, told Reuters.
Across the country from California, Jeff Thingpen, register of
deeds in Guildford County, North Carolina, examined 6,100
mortgage documents last year, from loan notes to foreclosure
paperwork. Of those documents, created between January 2008 and
December 2010, 4,500 showed signature irregularities, a telltale
sign of the illegal practice of "robosigning" documents.
One of the major problems that has emerged in the foreclosure
crisis is that it is far from clear that many lenders foreclosing
on properties actually own the loans and have the right to take
action against them. In many cases during the housing bubble
that burst in 2008, original mortgages were repackaged and sold
to so many investors that it is now unclear who actually holds
the loans. In the San Francisco study, which studied properties
subject to foreclosure sales between January 2009 to November
2011, 45 per cent were sold to entities improperly claiming to be
the owner of the loan. "It is not impossible that there are
homeowners who are alleged to have defaulted on loans to which
they never fully agreed to and, further, are being foreclosed
upon by lenders that might not even own such loans," the report
stated.
One factor that probably caused the particularly high 84 per cent
rate of illegal foreclosures in San Francisco is that California
is a "non-judicial" foreclosure state. In other words, the
foreclosure process does not need to be overseen by a judge. That
left the conduct of lenders in California - one of the
hardest-hit states in terms of foreclosures - largely
unscrutinized until the robosigning scandal gained prominence in
late 2010. In judicial foreclosure states such as New York, some
judges have been taking banks to task for submitting faulty
foreclosure paperwork. But Ray Brescia, a visiting professor at
Yale Law School and an expert in housing law, said foreclosure
fraud had been as rampant in judicial states as non-judicial
ones. "This number around 80% is not a number we have not seen
before," Brescia said, referring to both the issuing of faulty
loans during the housing bubble and the foreclosure crisis that
followed. "There have been a very high level of irregularities
across the country."
Businesses brace for new "fair" tax plan
The Treasury Department will roll out a corporate tax reform plan
today from President Barack Obama, administration officials said
yesterday, with expectations low for any major tax code overhaul
in an election year. The Obama plan will follow such principles
as "fairness" that the president laid out in his State of the
Union address to Congress last month, the officials said. A cut
in the corporate tax rate, which presently tops out at 35%, may
be included, as well as a proposal for a minimum tax on overseas
profits, analysts said. After the presidential and congressional
contests are decided in November, however, a number of major tax
and budget issues will converge on Washington and new momentum
for comprehensive tax reform may follow. Potomac Research
analyst Greg Valliere said: "Even if Geithner floats something
and members of both parties say they're interested, I simply
cannot see a reform bill passing before the election, close to a
zero% chance." He added: "I suppose anything would be possible
in a lame-duck session in December, but something this huge and
complex will require a thorough vetting, and that could take a
year - or much longer." The last major rewrite of the tax code
came in 1986 under Republican President Ronald Reagan.
Republican Representative Dave Camp, chairman of the US House of
Representatives tax-law writing Ways and Means Committee, wants
to slash the top corporate rate to 25%. Obama last week unveiled
a $3.8 billion budget-and-tax proposal that called for aggressive
government spending to boost the economy and for higher taxes on
the rich. On Friday, Congress approved extending a payroll tax
cut through the end of 2012. Its expiration will coincide with
several other fiscal earthquakes: the expirations of individual
tax cuts enacted under President George W. Bush, and $1.2
trillion in automatic budget cuts across all government programs
imposed as part of last year's deal to raise the debt ceiling.
After these events and others, analysts said, thorough tax reform
may be a realistic prospect. For now, they said, tax proposals
will largely amount to political messaging. Republican
presidential candidate Mitt Romney on Tuesday called for a
flatter, fairer and simpler tax code. He is scheduled to make a
major economic speech on Friday in Detroit. Details of his tax
plan may emerge before then.
Mortgage applications down
The Mortgage Bankers Association (MBA) said its seasonally
adjusted index of mortgage application activity, which includes
both refinancing and home purchase demand, fell 4.5% in the week
ended Feb 17. The MBA's seasonally adjusted index of refinancing
applications gave up 4.8%, while the gauge of loan requests for
home purchases slipped 2.9%. The refinance share of total
mortgage activity dipped to 80.1% of applications from 81.1%.
Fixed 30-year mortgage rates averaged 4.09%, up 1 basis point
from 4.08% the week before. The survey covers over 75% of US
retail residential mortgage applications, according to MBA.
Eurozone at the brink of recession
The euro zone economy is in danger of tipping into recession,
with the services sector shrinking this month along with
manufacturing, tempering a wave of optimism after a new bailout
deal for Greece struck this week. Surveys of purchasing managers
published on Wednesday showed unexpectedly weak activity in the
region's most powerful economy, Germany, and in France. This is
as well as in the bloc's floundering debtor states, such as
Spain, where unemployment is running at 23%, and Greece where the
euro debt crisis began more than two years ago and continuous
cuts have provoked riots. The Markit Eurozone Composite Flash
PMI, a good leading indicator of overall economic growth, fell to
49.7 in February from 50.4 last month, below expectations for a
rise to 50.6 and under the 50 line that divides growth from
contraction. That weakness was echoed in China, whose PMI showed
export orders falling in their worst performance in eight months.
Europe is China's biggest export market.
Older data published on Wednesday, official figures on euro zone
industrial orders for December, showed there had been some
stabilization at low levels. Manufacturing orders in the 17
countries that share the euro rose 1.9% on the month, beating the
0.7% predicted in a Reuters poll and reversing a 1.1% fall in
November. But with euro crisis curtailing on British business
with the bloc, two Bank of England policymakers voted earlier
this month for an even bigger stimulus to the economy in February
than the extra 50 billion pounds ($79 billion)that their
colleagues agreed to pump into the economy, minutes to the BoE's
February 8-9 meeting showed.
Olick - will gas prices be the spoiler?
"I spent Sunday afternoon at a Toll Brothers neighborhood in
Northern Virginia called 'Dominion Valley.' It’s a planned
community about 45 miles from the heart of DC that sprung up in
2000 and has sold 2500 homes, with another 1,000 still planned.
My mission was to get a sense of buyer traffic as the
President’s Day weekend unofficially kicks off the spring home
selling season. As I was driving back toward DC, I noticed the
price of gas (for the cheap stuff) was $3.75 a gallon. Ouch.
(They're higher in other parts of the country). That can’t be
good for sales. Some of the potential buyers I spoke with
worried about the drive time, but hadn’t seemed to give gas
prices as much thought. Many people who live in Dominion Valley
commute into the city, or just outside to the Pentagon and
surrounding contractor base in Crystal City. Commutes in this
area are often long, but when gas prices spike they become more
costly, too.
The sales center and model homes bustling with potential buyers.
With a weather forecast for snow and the 'National Sales Event'
advertised by Toll Brothers was mostly discounts on upgrades, I
was surprised to see a steady crowd. John Elcano, Toll’s VP for
Virginia Sales, told me they’ve raised prices four times since
October. Several of the potential and actual buyers I spoke with
were eager to move, one from a condo in the same community,
another a first time home buyer, and another who was downsizing
from a bigger house with a bigger yard. Scott Genburg and his
wife, who live near Dominion Valley, already sold their existing
house, without even putting it on the market. A realtor canvassed
their neighborhood and they accepted the offer. So they ended up
needing to buy something fast and bought a new home. But none of
the folks I spoke with were looking for a bigger house with a
longer commute, a stable of the boom times.
With the federal government a steady source of jobs, the
Washington, DC, and Northern Virginia markets have shown
resilience in the face of the great recession. Builders seem to
be responding. Metrostudy reports that finished, vacant housing
inventory rose more sharply than any other market it studies in
the last quarter, up 17.7%. At the same time, the inventory of
existing homes for sale is low. Ken Croisetiere, who just got
married, expressed frustration with the house hunting process 'it
feels like a great time to buy, but what we're finding out is
that the houses that appeal to us are not as abundant as we would
like to find. Toll’s Elcano says, 'people are relocating to the
area, they can’t find a resale to move into so they‘re moving
more toward the new construction.' But will people still move to
new construction in the suburbs if it cost $100 to keep the tank
full on a weekly basis? ISI home building analyst Steve East says
higher gas prices will impact builders, with a 'modest effect' on
the entry level market."
Oil hits $106
Oil prices hovered above $106 a barrel Wednesday in Asia amid
concern that conflict over Iran's nuclear program could lead to
global crude supply disruptions. Benchmark crude for April
delivery was up 11 cents to $106.36 per barrel late afternoon
Singapore time in electronic trading on the New York Mercantile
Exchange. The contract rose $2.65 to settle at $106.25, the
highest since May, in New York on Tuesday. Brent crude was down
16 cents at $121.50 per barrel in London. Oil has jumped from
$96 earlier this month amid escalating tension between Western
powers and Iran. On Tuesday, Iran Gen. Mohammed Hejazi warned
his country is prepared to carry out a pre-emptive strike against
any nation that threatens Iran. His comments followed Iran's
announcement of war games to practice protecting nuclear and
other sensitive sites — viewed as a message to the US and
Israel that the Islamic Republic is ready both to defend itself
and to retaliate against an armed strike.
Iran said over the weekend that it will stop selling oil to
Britain and France in retaliation for a planned European oil
embargo this summer. The move was mainly symbolic — Britain
and France import almost no oil from Iran — but it raised
concerns that Iran, which produces almost 4 million barrel a day
of crude, could take the same hard line with other European
nations that use more Iranian crude. "A real stoppage of 4
million barrels a day will send crude markets to at least $130,"
Carl Larry of Oil Outlooks and Opinions said in a report. "A
stoppage longer than a month will push that number to $150.
Damage to oil fields or transport areas will add even more
premium that will not go away for years."
WSJ- should mortgage rates be even lower?
Mortgage rates are the lowest on record. But by a key historical
measure, they should be even lower. Over the past year, a wide
gap ripped open between the mortgage rates house hunters see and
a benchmark interest rate investors demand to buy bonds backed by
home loans. In normal times, this obscure metric would only be
of interest to bankers, brokers and traders of mortgage-backed
securities. But with housing still dragging on the economy, the
spread is potentially slowing the recovery—and important to
everyone from top Washington policy makers to strapped homeowners
who could use a few extra dollars each month.
For months, a key interest rate on mortgage-backed
securities—known as the current coupon yield—has tumbled
faster than average US 30-year mortgage rates. In recent weeks,
the difference between the two has flirted with levels seen in
the aftermath of the financial crisis. Some say the wide spread
shows the large banks that dominate the mortgage market are
flexing their muscle by keeping prices relatively high. Others
argue the gap reflects increased regulatory costs, risks and new
realities of mortgage making. Either way, the spread is wide.
Tuesday afternoon, it was 0.96 percentage points—almost double
its average over almost 30 years. It has been as high as 1.20
percentage points this year.
If history is any guide, it should be a lot lower. With yields on
mortgage-backed securities at these levels, the 30-year fixed
rate mortgages would be roughly 3.40% if the spread was around
its historical average of 0.50 percentage points. That rate
would save a US homeowner with the average outstanding loan
balance of $155,000 about $41 in mortgage payments each month,
versus the current rate.
Over the seven-year period someone usually holds a 30-year
mortgage, that translates into a roughly $3,446 difference,
according to numbers provided by trade publication Inside
Mortgage Finance. Wider spreads generally translate into better
margins for banks and brokers. And some lenders have seen
profitability on mortgage origination improve as the spread has
widened. Some mortgage-finance observers suggest that increased
concentration among the large banks that dominate the mortgage
market better helps explain the wide spreads. They argue that
because there are fewer banks doing the bulk of the mortgage
lending than in years past, it is easier for them to capture
market share without offering rock-bottom prices. "It's a lack
of competition. We really haven't seen a competitive marketplace
since 2008," said Guy Cecala, publisher of Inside Mortgage
Finance.
A report this week showing rampant foreclosure abuse in San
Francisco reflects similar levels of lender fraud and faulty
documentation across the United States, say experts and officials
who have done studies in other parts of the country. The audit
of almost 400 foreclosures in San Francisco found that 84% of
them appeared to be illegal, according to the study released by
the California city on Wednesday. "The audit in San Francisco is
the most detailed and comprehensive that has been done - but it's
likely those numbers are comparable nationally," Diane Thompson,
an attorney at the National Consumer Law Center, told Reuters.
Across the country from California, Jeff Thingpen, register of
deeds in Guildford County, North Carolina, examined 6,100
mortgage documents last year, from loan notes to foreclosure
paperwork. Of those documents, created between January 2008 and
December 2010, 4,500 showed signature irregularities, a telltale
sign of the illegal practice of "robosigning" documents.
One of the major problems that has emerged in the foreclosure
crisis is that it is far from clear that many lenders foreclosing
on properties actually own the loans and have the right to take
action against them. In many cases during the housing bubble
that burst in 2008, original mortgages were repackaged and sold
to so many investors that it is now unclear who actually holds
the loans. In the San Francisco study, which studied properties
subject to foreclosure sales between January 2009 to November
2011, 45 per cent were sold to entities improperly claiming to be
the owner of the loan. "It is not impossible that there are
homeowners who are alleged to have defaulted on loans to which
they never fully agreed to and, further, are being foreclosed
upon by lenders that might not even own such loans," the report
stated.
One factor that probably caused the particularly high 84 per cent
rate of illegal foreclosures in San Francisco is that California
is a "non-judicial" foreclosure state. In other words, the
foreclosure process does not need to be overseen by a judge. That
left the conduct of lenders in California - one of the
hardest-hit states in terms of foreclosures - largely
unscrutinized until the robosigning scandal gained prominence in
late 2010. In judicial foreclosure states such as New York, some
judges have been taking banks to task for submitting faulty
foreclosure paperwork. But Ray Brescia, a visiting professor at
Yale Law School and an expert in housing law, said foreclosure
fraud had been as rampant in judicial states as non-judicial
ones. "This number around 80% is not a number we have not seen
before," Brescia said, referring to both the issuing of faulty
loans during the housing bubble and the foreclosure crisis that
followed. "There have been a very high level of irregularities
across the country."
Businesses brace for new "fair" tax plan
The Treasury Department will roll out a corporate tax reform plan
today from President Barack Obama, administration officials said
yesterday, with expectations low for any major tax code overhaul
in an election year. The Obama plan will follow such principles
as "fairness" that the president laid out in his State of the
Union address to Congress last month, the officials said. A cut
in the corporate tax rate, which presently tops out at 35%, may
be included, as well as a proposal for a minimum tax on overseas
profits, analysts said. After the presidential and congressional
contests are decided in November, however, a number of major tax
and budget issues will converge on Washington and new momentum
for comprehensive tax reform may follow. Potomac Research
analyst Greg Valliere said: "Even if Geithner floats something
and members of both parties say they're interested, I simply
cannot see a reform bill passing before the election, close to a
zero% chance." He added: "I suppose anything would be possible
in a lame-duck session in December, but something this huge and
complex will require a thorough vetting, and that could take a
year - or much longer." The last major rewrite of the tax code
came in 1986 under Republican President Ronald Reagan.
Republican Representative Dave Camp, chairman of the US House of
Representatives tax-law writing Ways and Means Committee, wants
to slash the top corporate rate to 25%. Obama last week unveiled
a $3.8 billion budget-and-tax proposal that called for aggressive
government spending to boost the economy and for higher taxes on
the rich. On Friday, Congress approved extending a payroll tax
cut through the end of 2012. Its expiration will coincide with
several other fiscal earthquakes: the expirations of individual
tax cuts enacted under President George W. Bush, and $1.2
trillion in automatic budget cuts across all government programs
imposed as part of last year's deal to raise the debt ceiling.
After these events and others, analysts said, thorough tax reform
may be a realistic prospect. For now, they said, tax proposals
will largely amount to political messaging. Republican
presidential candidate Mitt Romney on Tuesday called for a
flatter, fairer and simpler tax code. He is scheduled to make a
major economic speech on Friday in Detroit. Details of his tax
plan may emerge before then.
Mortgage applications down
The Mortgage Bankers Association (MBA) said its seasonally
adjusted index of mortgage application activity, which includes
both refinancing and home purchase demand, fell 4.5% in the week
ended Feb 17. The MBA's seasonally adjusted index of refinancing
applications gave up 4.8%, while the gauge of loan requests for
home purchases slipped 2.9%. The refinance share of total
mortgage activity dipped to 80.1% of applications from 81.1%.
Fixed 30-year mortgage rates averaged 4.09%, up 1 basis point
from 4.08% the week before. The survey covers over 75% of US
retail residential mortgage applications, according to MBA.
Eurozone at the brink of recession
The euro zone economy is in danger of tipping into recession,
with the services sector shrinking this month along with
manufacturing, tempering a wave of optimism after a new bailout
deal for Greece struck this week. Surveys of purchasing managers
published on Wednesday showed unexpectedly weak activity in the
region's most powerful economy, Germany, and in France. This is
as well as in the bloc's floundering debtor states, such as
Spain, where unemployment is running at 23%, and Greece where the
euro debt crisis began more than two years ago and continuous
cuts have provoked riots. The Markit Eurozone Composite Flash
PMI, a good leading indicator of overall economic growth, fell to
49.7 in February from 50.4 last month, below expectations for a
rise to 50.6 and under the 50 line that divides growth from
contraction. That weakness was echoed in China, whose PMI showed
export orders falling in their worst performance in eight months.
Europe is China's biggest export market.
Older data published on Wednesday, official figures on euro zone
industrial orders for December, showed there had been some
stabilization at low levels. Manufacturing orders in the 17
countries that share the euro rose 1.9% on the month, beating the
0.7% predicted in a Reuters poll and reversing a 1.1% fall in
November. But with euro crisis curtailing on British business
with the bloc, two Bank of England policymakers voted earlier
this month for an even bigger stimulus to the economy in February
than the extra 50 billion pounds ($79 billion)that their
colleagues agreed to pump into the economy, minutes to the BoE's
February 8-9 meeting showed.
Olick - will gas prices be the spoiler?
"I spent Sunday afternoon at a Toll Brothers neighborhood in
Northern Virginia called 'Dominion Valley.' It’s a planned
community about 45 miles from the heart of DC that sprung up in
2000 and has sold 2500 homes, with another 1,000 still planned.
My mission was to get a sense of buyer traffic as the
President’s Day weekend unofficially kicks off the spring home
selling season. As I was driving back toward DC, I noticed the
price of gas (for the cheap stuff) was $3.75 a gallon. Ouch.
(They're higher in other parts of the country). That can’t be
good for sales. Some of the potential buyers I spoke with
worried about the drive time, but hadn’t seemed to give gas
prices as much thought. Many people who live in Dominion Valley
commute into the city, or just outside to the Pentagon and
surrounding contractor base in Crystal City. Commutes in this
area are often long, but when gas prices spike they become more
costly, too.
The sales center and model homes bustling with potential buyers.
With a weather forecast for snow and the 'National Sales Event'
advertised by Toll Brothers was mostly discounts on upgrades, I
was surprised to see a steady crowd. John Elcano, Toll’s VP for
Virginia Sales, told me they’ve raised prices four times since
October. Several of the potential and actual buyers I spoke with
were eager to move, one from a condo in the same community,
another a first time home buyer, and another who was downsizing
from a bigger house with a bigger yard. Scott Genburg and his
wife, who live near Dominion Valley, already sold their existing
house, without even putting it on the market. A realtor canvassed
their neighborhood and they accepted the offer. So they ended up
needing to buy something fast and bought a new home. But none of
the folks I spoke with were looking for a bigger house with a
longer commute, a stable of the boom times.
With the federal government a steady source of jobs, the
Washington, DC, and Northern Virginia markets have shown
resilience in the face of the great recession. Builders seem to
be responding. Metrostudy reports that finished, vacant housing
inventory rose more sharply than any other market it studies in
the last quarter, up 17.7%. At the same time, the inventory of
existing homes for sale is low. Ken Croisetiere, who just got
married, expressed frustration with the house hunting process 'it
feels like a great time to buy, but what we're finding out is
that the houses that appeal to us are not as abundant as we would
like to find. Toll’s Elcano says, 'people are relocating to the
area, they can’t find a resale to move into so they‘re moving
more toward the new construction.' But will people still move to
new construction in the suburbs if it cost $100 to keep the tank
full on a weekly basis? ISI home building analyst Steve East says
higher gas prices will impact builders, with a 'modest effect' on
the entry level market."
Oil hits $106
Oil prices hovered above $106 a barrel Wednesday in Asia amid
concern that conflict over Iran's nuclear program could lead to
global crude supply disruptions. Benchmark crude for April
delivery was up 11 cents to $106.36 per barrel late afternoon
Singapore time in electronic trading on the New York Mercantile
Exchange. The contract rose $2.65 to settle at $106.25, the
highest since May, in New York on Tuesday. Brent crude was down
16 cents at $121.50 per barrel in London. Oil has jumped from
$96 earlier this month amid escalating tension between Western
powers and Iran. On Tuesday, Iran Gen. Mohammed Hejazi warned
his country is prepared to carry out a pre-emptive strike against
any nation that threatens Iran. His comments followed Iran's
announcement of war games to practice protecting nuclear and
other sensitive sites — viewed as a message to the US and
Israel that the Islamic Republic is ready both to defend itself
and to retaliate against an armed strike.
Iran said over the weekend that it will stop selling oil to
Britain and France in retaliation for a planned European oil
embargo this summer. The move was mainly symbolic — Britain
and France import almost no oil from Iran — but it raised
concerns that Iran, which produces almost 4 million barrel a day
of crude, could take the same hard line with other European
nations that use more Iranian crude. "A real stoppage of 4
million barrels a day will send crude markets to at least $130,"
Carl Larry of Oil Outlooks and Opinions said in a report. "A
stoppage longer than a month will push that number to $150.
Damage to oil fields or transport areas will add even more
premium that will not go away for years."
WSJ- should mortgage rates be even lower?
Mortgage rates are the lowest on record. But by a key historical
measure, they should be even lower. Over the past year, a wide
gap ripped open between the mortgage rates house hunters see and
a benchmark interest rate investors demand to buy bonds backed by
home loans. In normal times, this obscure metric would only be
of interest to bankers, brokers and traders of mortgage-backed
securities. But with housing still dragging on the economy, the
spread is potentially slowing the recovery—and important to
everyone from top Washington policy makers to strapped homeowners
who could use a few extra dollars each month.
For months, a key interest rate on mortgage-backed
securities—known as the current coupon yield—has tumbled
faster than average US 30-year mortgage rates. In recent weeks,
the difference between the two has flirted with levels seen in
the aftermath of the financial crisis. Some say the wide spread
shows the large banks that dominate the mortgage market are
flexing their muscle by keeping prices relatively high. Others
argue the gap reflects increased regulatory costs, risks and new
realities of mortgage making. Either way, the spread is wide.
Tuesday afternoon, it was 0.96 percentage points—almost double
its average over almost 30 years. It has been as high as 1.20
percentage points this year.
If history is any guide, it should be a lot lower. With yields on
mortgage-backed securities at these levels, the 30-year fixed
rate mortgages would be roughly 3.40% if the spread was around
its historical average of 0.50 percentage points. That rate
would save a US homeowner with the average outstanding loan
balance of $155,000 about $41 in mortgage payments each month,
versus the current rate.
Over the seven-year period someone usually holds a 30-year
mortgage, that translates into a roughly $3,446 difference,
according to numbers provided by trade publication Inside
Mortgage Finance. Wider spreads generally translate into better
margins for banks and brokers. And some lenders have seen
profitability on mortgage origination improve as the spread has
widened. Some mortgage-finance observers suggest that increased
concentration among the large banks that dominate the mortgage
market better helps explain the wide spreads. They argue that
because there are fewer banks doing the bulk of the mortgage
lending than in years past, it is easier for them to capture
market share without offering rock-bottom prices. "It's a lack
of competition. We really haven't seen a competitive marketplace
since 2008," said Guy Cecala, publisher of Inside Mortgage
Finance.
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