New bill to speed up short sales
Senators Lisa Murkowski, Scott Brown, and Sherrod Brown are
proposing a bill requiring mortgage lenders to make a prompt
decision on whether to allow a short sale at the request of a
home buyer. The bill, “Prompt Notification of Short Sales
Act,” will require a written response from the lender no later
than 75 days after the receipt of the written request from the
buyer. This bill will require that the lender’s written
response to the buyer must specify whether the request was
approved, if more time is required, and, if they do need more
time, the servicer must estimate a date a decision will be
reached. The loan servicer is limited to one extension no longer
than 21 days. This will give the distressed homeowner a more
definite timeline for when the short sale will be completed so
they can plan their move better.
Back in April 2011, Representatives Thomas Rooney of Florida and
Robert Andrews of New Jersey introduced a similar version of the
bill but it never came up for debate before a House committee
before the legislative session ended. The previous version said
that that if a borrower submitted a written request for a short
sale of a home and if they didn’t receive a written response
within 45 days, the request would be considered approved. This
new version extends the response time for lenders but includes a
penalty if they fail to comply. If the loan servicer doesn’t
respond to a buyer’s request within the 75 day period, the
buyer may be awarded $1000, plus reasonable attorney fees, per
violation of the Act (this Act does not apply to mortgages where
the borrower and the servicer have entered into a written
agreement before the date of the enactment of this Act). The new
bill would hold banks accountable to specific standards that they
must follow, streamlining the process for everyone involved in
the short sale transaction. It would make short sales more
attractive to buyers and eliminate the uncertainty related to
buying a short sale, resulting in more sales of distressed
properties. This reduction of housing inventory will assist the
stabilization of home prices and the real estate market.
Greece - again
Euro zone finance ministers are expected to approve a second
bailout for Greece today to try to draw a line under months of
uncertainty that has shaken the currency bloc, although work
remains to be done to make the numbers add up. Diplomats and
economists say they do not expect the package to resolve Greece's
economic problems. That could take a decade or more, a bleak
prospect that brought thousands of Greeks onto the streets to
protest against austerity measures on Sunday. French Finance
Minister Francois Baroin said all the elements were in place to
reach an agreement and Greek Finance Minister Evangelos Venizelos
said he expected a deal. The finance ministers are scheduled to
meet at around 1500 GMT. Euro zone ministers need to agree new
measures to make the financing work, given the ever-worsening
state of the Greek economy. But they say an agreement on Monday
will help restructure Athens' vast debts, put it on a more stable
financial footing and keep it inside the 17-country euro zone.
Senior Greek finance ministry and European Central Bank officials
held a conference call on Sunday to go over the final details of
the 130-billion-euro ($171-billion) program, including a report
assessing the likelihood of Greece lowering its debt which is
critical to the International Monetary Fund. While there is
skepticism in Germany and other countries that Greece will be
able to meet its commitments, including implementing 3.3 billion
euros of spending cuts and tax increases, officials said momentum
was building for a deal.
Olick - fewer foreclosures mean lower prices?
"For years now we have been harping on how distressed home sales
put downward pressure on home prices all around them. Close to
twelve million borrowers are now in a negative equity position on
their homes because so many other borrowers were unable to afford
their mortgages. The logical assumption would then be that as
foreclosures ease, organic home prices will rebound. But what if
the current, unique state of the housing market turns that
assumption on its head? Foreclosure sales now make up a full one
third of the market nationally and far higher percentages in
states like California, Florida, Nevada, and Georgia. The supply
of these properties has actually been dropping, pushing prices
higher, even in the distressed category. There is huge investor
and first-time home buyer demand for distressed properties at the
low end of the market, and that has helped stabilize prices. 'We
believe the distressed part of the housing market has already
bottomed,' said Morgan Stanley analyst Oliver Chang on CNBC’s
Squawkbox. 'The bid that we see from the investor is the reason
for this bottom.' He sees further declines in organic home
prices. Why?
Banks have been very slow to release their repossessed (REO)
inventory onto the market, not to mention that foreclosure
processing delays have literally millions of properties still
sitting in foreclosure limbo. There is a dwindling supply of
foreclosures and rising investor demand. Analysts keep pointing
to overall falling inventories, but the current existing home
sales pace doesn’t account for that drop. The fact is that
with so much of the supply distressed, and so few organic sellers
putting their homes up for sale, the inventory drop is
artificially skewed to the recent lack of movement in
foreclosures and a crisis of confidence among potential organic
home sellers. Okay, so what about the fact that banks are
ramping up the process now, which could put more properties on
the market? That could boost supply, were it not for a new
government program to sell foreclosures in bulk to large
investors. Chang says over $1 billion in investor capital has
been raised over just the past six weeks to take advantage of
this new program, and he claims this could add up to 1.8 million
jobs. Property managers, renovators, rental agents, he says would
benefit from these bulk rental investments.
Mortgage analyst Mark Hanson, however, disagrees. He claims that
individual investors will likely spend more on
upgrades/renovations than bulk investors and will then sell to
owner-occupants at a higher price, thereby not only stabilizing
but increasing overall home values, while also juicing jobs.
'Due to epidemic effective negative equity (not having enough
equity to pay a Realtor and put a down payment on a new house)
the repeat buyer cohort has been cut in half since 2007. They now
make up the minority of national resales,' says Hanson.
'Investors and first-time buyers ARE the real estate market,' he
adds. 'Investors and first timers want REO and short sales.
Anything done to prevent the flow of distressed property will
hurt the volume of existing home sales and all of the economic
benefit that comes along with them. An REO-to-rent program will
bring about record lows in monthly existing home sales volume.
And volume precedes price.' Hanson believes that when the
distressed supply is choked off, by selling REO in bulk to rent,
not re-sell, then the only thing you have left is meager organic
sales. 'The housing market will implode,' he adds.
Yes, lower supply, in a normal market, would generally mean a
return to home price appreciation, but that’s not the way
today’s market is working because organic demand is still so
weak and is hampered by tight credit. There is even less demand
for mid- to higher-priced homes. '$200K to $300K is the new
normal for home builders,' says Rick Palacios of John Burns Real
Estate Consulting. 'Since new home prices peaked in 2007, new
single-family sales of over $500K have been more than cut in
half, dropping from 13% to just 6% of all new home transactions.
The existing home market is much the same, with the bulk of sales
and demand in the very low price tiers. It just goes to show that
in the historic recovery from an historic housing crash, the
usual rules just don’t apply."
Iran drives oil higher
Oil prices jumped to a nine-month high above $105 a barrel on
Monday after Iran said it halted crude exports to Britain and
France in an escalation of a dispute over the Middle Eastern
country's nuclear program. By early afternoon in Europe,
benchmark March crude was up $1.91 to $105.15 per barrel in
electronic trading on the New York Mercantile Exchange. Earlier
in the day, it rose to $105.21, the highest since May. The
contract rose 93 cents to settle at $103.24 per barrel in New
York on Friday. Markets in the United States are closed Monday
for the Presidents Day holiday. Iran's oil ministry said Sunday
it stopped crude shipments to British and French companies in an
apparent pre-emptive blow against the European Union after the
bloc imposed sanctions on Iran's crucial fuel exports. They
include a freeze of the country's central bank assets and an oil
embargo set to begin in July. Iran's Oil Minister Rostam Qassemi
had warned earlier this month that Tehran could cut off oil
exports to "hostile" European nations. The 27-nation EU accounts
for about 18 percent of Iran's oil exports.
The EU sanctions, along with other punitive measures imposed by
the U.S., are part of Western efforts to derail Iran's disputed
nuclear program, which the West fears is aimed at developing
atomic weapons. Iran denies the charges, and says its program is
for peaceful purposes. Analysts said Iran's announcement would
likely have minimal impact on supplies, because only about 3
percent of France's oil consumption is from Iranian sources,
while Britain had not imported oil from the Islamic republic in
six months. "The price rise is more a reflection of concerns
about the further escalation in tensions between Iran and the
West," said commodity analyst Caroline Bain of the Economist
Intelligence Unit. "Banning the tiny quantities of exports to the
U.K. and France involves very little risk for Iran — indeed
quite the opposite, it catches the headlines and leads to a
higher global oil price, which is something Iran is very keen to
encourage."
Mortgage-backed bonds making a comeback
Some Wall Street investors made money as the mortgage market
boomed; others profited when it fell apart. Having reaped big
gains during both of those turns, Greg Lippmann, a former star
trader at Deutsche Bank, is now catching the next upswing: buying
the same securities built from mortgages that he bet against
before the financial crisis erupted. Mr. Lippmann is joined by
other big-money investors — mutual funds like Fidelity as well
as hedge funds — in riding a wave of interest in the same
complex loan pools that nearly washed away the financial system.
The attraction is the price. Some mortgage bonds are so cheap
that even in the worst forecasts, with home prices falling as
much as 10 percent and foreclosures rising, investors say they
can still make money. “Given its significant underperformance
in 2011, we believe the product is as cheap to broader markets as
it has been in a long time,” Mr. Lippmann, whose portfolio is
heavy with subprime mortgage securities, wrote in a recent letter
to investors.
Yet the tide could turn again and wipe out investors. Chief among
the risks is Europe: the Continent’s banks still hold a
significant amount of United States mortgage securities, and if
they are forced to sell assets, it could wreak havoc on the
market. Washington is a question mark, too. If banks have to pay
for loans they issued under dubious circumstances, it would be a
home run for investors, who could receive full payment for a
mortgage in a security they bought at a discount. But if
borrowers whose houses are worth less than their mortgages are
able to reduce their principals on a large scale, bond investors
could suffer because the securities would be worth even less than
they paid. “As a money manager, you can’t close your eyes to
that potential outcome,” said Jeffrey Gundlach, a founder of
DoubleLine Capital, who has been buying mortgage securities since
2008. “To believe that this time we are really out of the woods
and the prices will not drop again is dangerous. People made that
argument a year ago.”
Senators Lisa Murkowski, Scott Brown, and Sherrod Brown are
proposing a bill requiring mortgage lenders to make a prompt
decision on whether to allow a short sale at the request of a
home buyer. The bill, “Prompt Notification of Short Sales
Act,” will require a written response from the lender no later
than 75 days after the receipt of the written request from the
buyer. This bill will require that the lender’s written
response to the buyer must specify whether the request was
approved, if more time is required, and, if they do need more
time, the servicer must estimate a date a decision will be
reached. The loan servicer is limited to one extension no longer
than 21 days. This will give the distressed homeowner a more
definite timeline for when the short sale will be completed so
they can plan their move better.
Back in April 2011, Representatives Thomas Rooney of Florida and
Robert Andrews of New Jersey introduced a similar version of the
bill but it never came up for debate before a House committee
before the legislative session ended. The previous version said
that that if a borrower submitted a written request for a short
sale of a home and if they didn’t receive a written response
within 45 days, the request would be considered approved. This
new version extends the response time for lenders but includes a
penalty if they fail to comply. If the loan servicer doesn’t
respond to a buyer’s request within the 75 day period, the
buyer may be awarded $1000, plus reasonable attorney fees, per
violation of the Act (this Act does not apply to mortgages where
the borrower and the servicer have entered into a written
agreement before the date of the enactment of this Act). The new
bill would hold banks accountable to specific standards that they
must follow, streamlining the process for everyone involved in
the short sale transaction. It would make short sales more
attractive to buyers and eliminate the uncertainty related to
buying a short sale, resulting in more sales of distressed
properties. This reduction of housing inventory will assist the
stabilization of home prices and the real estate market.
Greece - again
Euro zone finance ministers are expected to approve a second
bailout for Greece today to try to draw a line under months of
uncertainty that has shaken the currency bloc, although work
remains to be done to make the numbers add up. Diplomats and
economists say they do not expect the package to resolve Greece's
economic problems. That could take a decade or more, a bleak
prospect that brought thousands of Greeks onto the streets to
protest against austerity measures on Sunday. French Finance
Minister Francois Baroin said all the elements were in place to
reach an agreement and Greek Finance Minister Evangelos Venizelos
said he expected a deal. The finance ministers are scheduled to
meet at around 1500 GMT. Euro zone ministers need to agree new
measures to make the financing work, given the ever-worsening
state of the Greek economy. But they say an agreement on Monday
will help restructure Athens' vast debts, put it on a more stable
financial footing and keep it inside the 17-country euro zone.
Senior Greek finance ministry and European Central Bank officials
held a conference call on Sunday to go over the final details of
the 130-billion-euro ($171-billion) program, including a report
assessing the likelihood of Greece lowering its debt which is
critical to the International Monetary Fund. While there is
skepticism in Germany and other countries that Greece will be
able to meet its commitments, including implementing 3.3 billion
euros of spending cuts and tax increases, officials said momentum
was building for a deal.
Olick - fewer foreclosures mean lower prices?
"For years now we have been harping on how distressed home sales
put downward pressure on home prices all around them. Close to
twelve million borrowers are now in a negative equity position on
their homes because so many other borrowers were unable to afford
their mortgages. The logical assumption would then be that as
foreclosures ease, organic home prices will rebound. But what if
the current, unique state of the housing market turns that
assumption on its head? Foreclosure sales now make up a full one
third of the market nationally and far higher percentages in
states like California, Florida, Nevada, and Georgia. The supply
of these properties has actually been dropping, pushing prices
higher, even in the distressed category. There is huge investor
and first-time home buyer demand for distressed properties at the
low end of the market, and that has helped stabilize prices. 'We
believe the distressed part of the housing market has already
bottomed,' said Morgan Stanley analyst Oliver Chang on CNBC’s
Squawkbox. 'The bid that we see from the investor is the reason
for this bottom.' He sees further declines in organic home
prices. Why?
Banks have been very slow to release their repossessed (REO)
inventory onto the market, not to mention that foreclosure
processing delays have literally millions of properties still
sitting in foreclosure limbo. There is a dwindling supply of
foreclosures and rising investor demand. Analysts keep pointing
to overall falling inventories, but the current existing home
sales pace doesn’t account for that drop. The fact is that
with so much of the supply distressed, and so few organic sellers
putting their homes up for sale, the inventory drop is
artificially skewed to the recent lack of movement in
foreclosures and a crisis of confidence among potential organic
home sellers. Okay, so what about the fact that banks are
ramping up the process now, which could put more properties on
the market? That could boost supply, were it not for a new
government program to sell foreclosures in bulk to large
investors. Chang says over $1 billion in investor capital has
been raised over just the past six weeks to take advantage of
this new program, and he claims this could add up to 1.8 million
jobs. Property managers, renovators, rental agents, he says would
benefit from these bulk rental investments.
Mortgage analyst Mark Hanson, however, disagrees. He claims that
individual investors will likely spend more on
upgrades/renovations than bulk investors and will then sell to
owner-occupants at a higher price, thereby not only stabilizing
but increasing overall home values, while also juicing jobs.
'Due to epidemic effective negative equity (not having enough
equity to pay a Realtor and put a down payment on a new house)
the repeat buyer cohort has been cut in half since 2007. They now
make up the minority of national resales,' says Hanson.
'Investors and first-time buyers ARE the real estate market,' he
adds. 'Investors and first timers want REO and short sales.
Anything done to prevent the flow of distressed property will
hurt the volume of existing home sales and all of the economic
benefit that comes along with them. An REO-to-rent program will
bring about record lows in monthly existing home sales volume.
And volume precedes price.' Hanson believes that when the
distressed supply is choked off, by selling REO in bulk to rent,
not re-sell, then the only thing you have left is meager organic
sales. 'The housing market will implode,' he adds.
Yes, lower supply, in a normal market, would generally mean a
return to home price appreciation, but that’s not the way
today’s market is working because organic demand is still so
weak and is hampered by tight credit. There is even less demand
for mid- to higher-priced homes. '$200K to $300K is the new
normal for home builders,' says Rick Palacios of John Burns Real
Estate Consulting. 'Since new home prices peaked in 2007, new
single-family sales of over $500K have been more than cut in
half, dropping from 13% to just 6% of all new home transactions.
The existing home market is much the same, with the bulk of sales
and demand in the very low price tiers. It just goes to show that
in the historic recovery from an historic housing crash, the
usual rules just don’t apply."
Iran drives oil higher
Oil prices jumped to a nine-month high above $105 a barrel on
Monday after Iran said it halted crude exports to Britain and
France in an escalation of a dispute over the Middle Eastern
country's nuclear program. By early afternoon in Europe,
benchmark March crude was up $1.91 to $105.15 per barrel in
electronic trading on the New York Mercantile Exchange. Earlier
in the day, it rose to $105.21, the highest since May. The
contract rose 93 cents to settle at $103.24 per barrel in New
York on Friday. Markets in the United States are closed Monday
for the Presidents Day holiday. Iran's oil ministry said Sunday
it stopped crude shipments to British and French companies in an
apparent pre-emptive blow against the European Union after the
bloc imposed sanctions on Iran's crucial fuel exports. They
include a freeze of the country's central bank assets and an oil
embargo set to begin in July. Iran's Oil Minister Rostam Qassemi
had warned earlier this month that Tehran could cut off oil
exports to "hostile" European nations. The 27-nation EU accounts
for about 18 percent of Iran's oil exports.
The EU sanctions, along with other punitive measures imposed by
the U.S., are part of Western efforts to derail Iran's disputed
nuclear program, which the West fears is aimed at developing
atomic weapons. Iran denies the charges, and says its program is
for peaceful purposes. Analysts said Iran's announcement would
likely have minimal impact on supplies, because only about 3
percent of France's oil consumption is from Iranian sources,
while Britain had not imported oil from the Islamic republic in
six months. "The price rise is more a reflection of concerns
about the further escalation in tensions between Iran and the
West," said commodity analyst Caroline Bain of the Economist
Intelligence Unit. "Banning the tiny quantities of exports to the
U.K. and France involves very little risk for Iran — indeed
quite the opposite, it catches the headlines and leads to a
higher global oil price, which is something Iran is very keen to
encourage."
Mortgage-backed bonds making a comeback
Some Wall Street investors made money as the mortgage market
boomed; others profited when it fell apart. Having reaped big
gains during both of those turns, Greg Lippmann, a former star
trader at Deutsche Bank, is now catching the next upswing: buying
the same securities built from mortgages that he bet against
before the financial crisis erupted. Mr. Lippmann is joined by
other big-money investors — mutual funds like Fidelity as well
as hedge funds — in riding a wave of interest in the same
complex loan pools that nearly washed away the financial system.
The attraction is the price. Some mortgage bonds are so cheap
that even in the worst forecasts, with home prices falling as
much as 10 percent and foreclosures rising, investors say they
can still make money. “Given its significant underperformance
in 2011, we believe the product is as cheap to broader markets as
it has been in a long time,” Mr. Lippmann, whose portfolio is
heavy with subprime mortgage securities, wrote in a recent letter
to investors.
Yet the tide could turn again and wipe out investors. Chief among
the risks is Europe: the Continent’s banks still hold a
significant amount of United States mortgage securities, and if
they are forced to sell assets, it could wreak havoc on the
market. Washington is a question mark, too. If banks have to pay
for loans they issued under dubious circumstances, it would be a
home run for investors, who could receive full payment for a
mortgage in a security they bought at a discount. But if
borrowers whose houses are worth less than their mortgages are
able to reduce their principals on a large scale, bond investors
could suffer because the securities would be worth even less than
they paid. “As a money manager, you can’t close your eyes to
that potential outcome,” said Jeffrey Gundlach, a founder of
DoubleLine Capital, who has been buying mortgage securities since
2008. “To believe that this time we are really out of the woods
and the prices will not drop again is dangerous. People made that
argument a year ago.”
No comments:
Post a Comment