Settlement to boost short sales
The government's $25 billion settlement with the nation's five
biggest mortgage servicers over so-called "robo-signing"
practices could boost short sales, as loan servicers will receive
credit when they approve sales that include forgiveness of a
portion of underwater homeowners' debt. Although the settlement
is only expected to help a fraction of homeowners who owe more
their properties are worth -- perhaps one in 20, according to one
estimate -- it will also help bring certainty back to housing
markets by removing some of the obstacles that have been keeping
homes stuck in the foreclosure pipeline. Announced last month,
detailed terms of the agreement between mortgage servicers and a
coalition of state attorneys general and federal agencies were
filed today.
Broadly, the settlement calls for mortgage servicers to pay $5
billion in fines and commit to a minimum of $17 billion in
homeowner relief, including principal reductions. Another $3
billion is earmarked for helping underwater borrowers refinance.
"We will see an increase in short sales, because lenders and loan
servicers will get the same credit for doing a short sale, as if
they did a loan modification or principal reduction," said Rick
Sharga, executive vice president of Carrington Mortgage Holdings
LLC. Allowing debt forgiveness on approved short sales to count
against the required $17 billion in principal reductions helped
secure a settlement that will reach more borrowers, the paper
said. Loan servicers will also get partial credit even when it's
investors, rather than the banks themselves, taking the loss.
Also, if the remaining six to 14 loan servicers sign on to the
settlement, it would grow to about $30 billion with more than $45
billion in benefit to homeowners, HUD said. Cade Holleman,
executive director of the Irvine, Calif.-based National
Association of Women REO Brokerages, said the day is fast
approaching when brokers and agents who have concentrated heavily
in real-estate owned properties will have to diversify. Short
sales, refinancings, and loan modifications are each "pulling REO
inventory out of the game," he said. "You've got to keep your
eye on that process," Holleman said. "You can no longer be 80%
REO," but must diversify into short sales and property
management.
Retail sales up
Total retail sales increased 1.1%, the Commerce Department said,
after an upwardly revised 0.6% rise in January. Economists
polled by Reuters had forecast retail sales rising 1% after a
previously reported 0.4% gain in January. Sales last month were
buoyed by a 1.6% rise in sales of motor vehicles, reflecting
pent-up demand by households and growing confidence in the
economy as job creation speeds up. Excluding autos, retail sales
advanced 0.9% last month, adding to January's upwardly revised
1.1% gain. Gas prices rose 20 cents last month, according to
government data. Sales at gasoline stations surged 3.3%, the
biggest gain since March last year, after rising 1.9% in January.
Excluding autos and gasoline, sales rose 0.6% in February after
increasing 1% the prior month. Gasoline accounted for 11.5% of
retail sales in February.
Outside autos and gas stations, details of the report were fairly
upbeat, suggesting recent solid gains in employment were
supporting consumer spending. Last month, clothing store
receipts jumped 1.8%, the largest increase since November 2010,
while sales at building materials and garden equipment suppliers
advanced 1.4%. So-called core retail sales, which exclude autos,
gasoline and building materials, were up 0.5% after advancing
1.0% in January. Core sales correspond most closely with the
consumer spending component of the government's gross domestic
product report. Sales at restaurants and bars rose 0.8%, while
receipts at sporting goods, hobby, book and music stores
increased 1.0%. Sales of electronics and appliances rose 1.0%,
while receipts at furniture stores fell 1.2%.
Olick - rent bubble?
"Typically when rents go up, more renters turn to home buying.
When home prices go up, more turn to renting, but today’s
housing market is anything but typical. Rents were up 3%
nationally in January, year-over-year, according to a soon-to-be
released new rental index from Zillow.com. Home prices, however,
were down 4.6% annually. When you look locally, the numbers are
more dramatic. In some markets, rents rose almost as much as
home values fell. Take Chicago, for example, where rents were up
just over 9% annually while home values were down just over 10%.
The same is true for Minneapolis, where the divide is nearly the
same. In San Francisco and Detroit, rents are up around 5% while
home prices are down the same. It begs the question, as the rent
vs. own divide grows, will the rental bubble suddenly burst?
Right now investors are rushing to get in on cheap foreclosures,
hoping to turn them around for quick rental income. The regulator
of Fannie Mae and Freddie Mac, the FHFA, is in the midst of a
pilot program to sell 2500 foreclosed properties to investors as
rentals. The bulk of these properties are already rented, which
means buyers get a turn-key investment with instant returns. In
the meantime, multi-family housing starts were up over 14% in
January from December and have been rising steadily as developers
look to cash in on high rental demand and relatively low supply.
Multi-family REITs are seeing big returns.
So what exactly is the tipping point, given that mortgage
availability is still tough, consumer confidence in housing is
still weak, and employment, while improving, is still not where
it needs to be to spur strong buyer demand? 'While it seems that
rents are rising at the expense of home values, the opposite is
true. A thriving rental market will stimulate home sales, as
investors snap up low-priced inventory to convert to rentals.
That, in turn, will lower the number of homes on the market,
which will eventually help put a floor under the value of all
homes,' says Zillow chief economist Stan Humphries. More supply
of rental homes, especially single family, could slow the upward
trajectory of rent rates, which in turn would make renting more
attractive and buying less so. It just raises a red flag to see
home affordability at a record high, investors rushing in, and
rents so strongly outpacing home values."
Banks to face tough reviews
Banks will face stiff penalties and intense public scrutiny if
they fail to live up to the standards of a $25 billion mortgage
settlement with state and federal authorities, according to court
documents filed as part of the deal Monday in federal court in
Washington. While the broad outline of the deal was announced
last month, the mechanics of the agreement that took more than a
year to negotiate were laid out in Monday’s filing, including
exactly how much credit the five banks would receive for varying
levels of loan forgiveness and just what kind of conduct from the
past is off-limits to future investigations. Banks must review
their adherence to the new rules every quarter through a random
sampling of cases, with a maximum threshold for errors at 1% in
some cases if they are to avoid fines. “Any error that is found
during the sampling process will have to be corrected,” the
official said. In some cases, servicers would face civil
penalties of up to $1 million for each violation of Monday’s
consent order. Repeat violations could bring fines of $5 million
each. An independent monitoring and enforcement office is being
set up under the agreement, to be paid for by the banks, that
will be led by Joseph A. Smith Jr., the former North Carolina
banking commissioner.
The complaint, which specifies the terms of the settlement, comes
nearly 18 months after reports of “robo-signing” and other
abuses in the foreclosure process set off a nationwide furor, and
marks another legal milestone in the wake of the bursting of the
housing bubble and the financial crisis of 2008-9. The five
banks covered by the settlement - Bank of America, JPMorgan
Chase, Wells Fargo, Citigroup and Ally - engaged “in a pattern
of unfair and deceptive practices,” according to the complaint.
Besides failing to perform modifications for borrowers seeking to
ease the terms of their loans, the documents also cite what
consumers have been complaining about for years: lost
applications and other paperwork, inadequately trained staff and
wrongfully denied modification requests.
WSJ - rise in Phoenix housing shows the way to recovery
As home prices continue to drop in most cities, a nascent
real-estate rebound here holds lessons for the rest of the
country. This sprawling desert metropolis was one of the hardest
hit housing markets during the bust. Phoenix home prices declined
55% from 2006 through the end of 2011, and Arizona's foreclosure
rate jumped to No. 3 in the nation in 2009. Hundreds of thousands
of homeowners are underwater. Now real-estate economists across
the country are studying an early but surprisingly broad Phoenix
turnaround. The sharp drop in home prices has brought new buyers
into the market. Unlike other markets where housing recoveries
have been snuffed out by big overhangs of homes for sale and
foreclosed properties, inventories are lean here. "Phoenix has
hit a bottom," says Thomas Lawler, an independent housing
economist who was one of the first to warn six years ago that
prices in overbuilt metros were poised to fall. The nation's
hard-hit housing markets face a tough act: engineering a housing
recovery without traditional trade-up buyers, many of whom are
either unwilling or unable to sell because of huge price
declines.
Phoenix has found a viable formula. Low prices are igniting
demand from first-time buyers and investors who are converting
the homes to rentals. The local economy is on the upswing with
several big employers like Amazon.com Inc. and Intel Corp. hiring
again, which is further increasing demand for housing. And the
region is benefiting from a surge of buyers from Canada who are
using their favorable exchange rate to scoop up bargains in the
desert. Local mom-and-pop investors are also playing key roles
in soaking up supply. Out-of-state buyers accounted for
one-quarter of all purchases last month. One in every 25 sales
went to a buyer that listed a Canadian address when registering
the sale, according to the Cromford Report, a local real-estate
publication. Many are flush with cash from a real-estate boom of
their own in Canada and an exchange rate that has given Canadians
unusual buying power.
Nationally, housing demand still remains weak and bank-owned
sales are expected to rise this year, putting more pressure on
prices. Many economists say they expect home prices nationally
could fall by another 3% or so this year before hitting a bottom
next year. Most expect that prices will rise little for several
years. US home prices fell another 2% in the fourth quarter on a
seasonally adjusted basis, according to the Standard &
Poor's/Case-Shiller index tracking 20 cities. But prices rose by
2% in Phoenix, the biggest increase of any metro area in the
country. Over the past year, prices in Phoenix are down by 1.2%,
the smallest drop since its prices started falling in 2006. Big
price drops, like those in Phoenix, are another key. In Detroit,
prices are down by 46% over the past six years and have fallen to
levels last seen in 1994. Sales have picked up in Miami, where
prices are down by 51% over the past five years.
But low prices alone haven't been enough to so stabilize other
epicenters of the housing bust where job growth still lags. In
Las Vegas, where prices have tumbled 62% since 2006, including
8.9% over the past year, the local economy is heavily dependent
on tourism and gambling, both industries that haven't recovered.
"A lot of markets in the country have hit a bottom, but I just
don't see them coming back the way Phoenix has," says John Burns,
a homebuilding consultant in Irvine, Calif. The improving
housing market in Phoenix isn't much comfort to anybody who
bought a home there a few years ago. More than 52% of mortgage
borrowers owe more than their homes are worth, according to
CoreLogic, a real-estate data company. And not everyone in
Phoenix is convinced that the improvements will last, especially
if the economy falters or oil prices soar. Phoenix saw a small
run-up in prices three years ago when federal tax credits spurred
a buying frenzy, but prices dropped again once the credits
expired. Others worry that banks have delayed foreclosures and
will begin to saturate the market with more properties in the
coming year.
Small business optimism up
Optimism among small business owners may be increasing at a
“glacial” pace, but it’s “mostly headed in the right
direction.” That’s according to William Dunkelberg, chief
economist of the National Federation of Independent Business and
keeper of the Small Business Optimism Index. The latest survey of
819 NFIB members showed indications that small business owners
are starting to spend, and could even ramp up hiring in some
sectors over the next few months. Respondents to the February
survey expressed optimism about their expectations for higher
real sales, an increase in inventories and positive earnings;
these three things taken together helped push the index up 0.4%,
to 94.3, the sixth straight increase in the monthly index.
Inventories have decreased for many business owners in the past
month - 20% of respondents reported reductions - which is good
news for an economy that needs spending to make it grow.
Capital outlays, too, are being planned, according to the survey.
“The capital spending number keeps going up,” he noted.
“It’s the highest we’ve seen in years.” While still far
from normal, he said, “Even if it’s just to fix a leaky roof,
business owners’ capital expenditures are rising.” In the
past month, more business owners also added workers - 12% of
owners added 3.4 workers per firm. The November elections, as
well as the uncertainty surrounding health-care reform, are
causing some business owners to remain on the sidelines, said
Dunkelberg, waiting to see the outcome of both before committing
to spending and expansion. “There is a lot of political
uncertainty between now and November,” he said. Still, the
trend, at least for now, is upward. And for many business owners,
even a slow improvement is better than movement in the other
direction.
Foreclosures to jump in 2012
Analysts expect between 900,000 and 1 million homes will move
from delinquency into REO in 2012, back to levels seen before the
robo-signing slowdown. Servicers moved roughly 800,000
properties through the foreclosure process and into REO
liquidation in 2011, according to RealtyTrac. After resolving
affidavit problems late last year, banks began moving more
properties through the process. JPMorgan Chase analysts expect
repossessions to reach as high as 900,000 even with a wave of new
alternatives to foreclosure. "Several major policy changes in
the last few months have sped up resolution of the pipeline. Of
course, new delinquencies will ensure that full resolution will
still take years, but the pace may be faster than we expected,"
analysts said. Daren Blomquist, vice president of RealtyTrac,
said that pace could return this year. "For 2011 we hit 804,423,
not quite the 825,000 we were on pace for because of a slowdown
in November and December," Blomquist said in an interview. "We
are expecting close to 1 million REOs in 2012 as some of the
delayed foreclosures finally complete the process this year."
The pace began to pick up in January but is still down from 2011.
Servicers repossessed 66,500 homes that month, up 8% from
December but down 15% from one year ago. Just because a property
moves into REO doesn't mean it will be resold that year, either.
For instance, Freddie Mac data shows the GSE had to wait an
average of nearly 200 days to unload an REO. According to
Blomquist, there were nearly 538,000 REO sales in 2011, roughly
two-thirds of all homes repossessed that year. About 2.6 million
loans, or half of the total delinquency inventory, will be
removed either through modification, short sale or a traditional
repossession in 2012, Chase analysts said. The AG settlement
guidelines released yesterday could result in 500,000
modifications, according to Chase. The Treasury Department
expanded the Home Affordable Modification Program in January to
allow more borrowers to qualify and provide higher incentives for
principal reduction.
Analysts still expect the changes to result in relatively few
additional modifications, roughly 140,000 added to the 220,000
permanent workouts under the program estimated this year. If so,
HAMP workouts may outnumber the 270,000 proprietary
modifications, which have routinely outsized HAMP in the past.
Chase analysts also expect the Fannie Mae and Freddie Mac bulk
REO sales and rental programs to reach as high as 100,000
properties. A pilot program began in February to sell just 2,500
Fannie-owned homes. Roughly 500,000 short sales could occur in
2012, roughly one-third of all liquidations — which include the
900,000 expected repossessions and the new rental program as
well
The government's $25 billion settlement with the nation's five
biggest mortgage servicers over so-called "robo-signing"
practices could boost short sales, as loan servicers will receive
credit when they approve sales that include forgiveness of a
portion of underwater homeowners' debt. Although the settlement
is only expected to help a fraction of homeowners who owe more
their properties are worth -- perhaps one in 20, according to one
estimate -- it will also help bring certainty back to housing
markets by removing some of the obstacles that have been keeping
homes stuck in the foreclosure pipeline. Announced last month,
detailed terms of the agreement between mortgage servicers and a
coalition of state attorneys general and federal agencies were
filed today.
Broadly, the settlement calls for mortgage servicers to pay $5
billion in fines and commit to a minimum of $17 billion in
homeowner relief, including principal reductions. Another $3
billion is earmarked for helping underwater borrowers refinance.
"We will see an increase in short sales, because lenders and loan
servicers will get the same credit for doing a short sale, as if
they did a loan modification or principal reduction," said Rick
Sharga, executive vice president of Carrington Mortgage Holdings
LLC. Allowing debt forgiveness on approved short sales to count
against the required $17 billion in principal reductions helped
secure a settlement that will reach more borrowers, the paper
said. Loan servicers will also get partial credit even when it's
investors, rather than the banks themselves, taking the loss.
Also, if the remaining six to 14 loan servicers sign on to the
settlement, it would grow to about $30 billion with more than $45
billion in benefit to homeowners, HUD said. Cade Holleman,
executive director of the Irvine, Calif.-based National
Association of Women REO Brokerages, said the day is fast
approaching when brokers and agents who have concentrated heavily
in real-estate owned properties will have to diversify. Short
sales, refinancings, and loan modifications are each "pulling REO
inventory out of the game," he said. "You've got to keep your
eye on that process," Holleman said. "You can no longer be 80%
REO," but must diversify into short sales and property
management.
Retail sales up
Total retail sales increased 1.1%, the Commerce Department said,
after an upwardly revised 0.6% rise in January. Economists
polled by Reuters had forecast retail sales rising 1% after a
previously reported 0.4% gain in January. Sales last month were
buoyed by a 1.6% rise in sales of motor vehicles, reflecting
pent-up demand by households and growing confidence in the
economy as job creation speeds up. Excluding autos, retail sales
advanced 0.9% last month, adding to January's upwardly revised
1.1% gain. Gas prices rose 20 cents last month, according to
government data. Sales at gasoline stations surged 3.3%, the
biggest gain since March last year, after rising 1.9% in January.
Excluding autos and gasoline, sales rose 0.6% in February after
increasing 1% the prior month. Gasoline accounted for 11.5% of
retail sales in February.
Outside autos and gas stations, details of the report were fairly
upbeat, suggesting recent solid gains in employment were
supporting consumer spending. Last month, clothing store
receipts jumped 1.8%, the largest increase since November 2010,
while sales at building materials and garden equipment suppliers
advanced 1.4%. So-called core retail sales, which exclude autos,
gasoline and building materials, were up 0.5% after advancing
1.0% in January. Core sales correspond most closely with the
consumer spending component of the government's gross domestic
product report. Sales at restaurants and bars rose 0.8%, while
receipts at sporting goods, hobby, book and music stores
increased 1.0%. Sales of electronics and appliances rose 1.0%,
while receipts at furniture stores fell 1.2%.
Olick - rent bubble?
"Typically when rents go up, more renters turn to home buying.
When home prices go up, more turn to renting, but today’s
housing market is anything but typical. Rents were up 3%
nationally in January, year-over-year, according to a soon-to-be
released new rental index from Zillow.com. Home prices, however,
were down 4.6% annually. When you look locally, the numbers are
more dramatic. In some markets, rents rose almost as much as
home values fell. Take Chicago, for example, where rents were up
just over 9% annually while home values were down just over 10%.
The same is true for Minneapolis, where the divide is nearly the
same. In San Francisco and Detroit, rents are up around 5% while
home prices are down the same. It begs the question, as the rent
vs. own divide grows, will the rental bubble suddenly burst?
Right now investors are rushing to get in on cheap foreclosures,
hoping to turn them around for quick rental income. The regulator
of Fannie Mae and Freddie Mac, the FHFA, is in the midst of a
pilot program to sell 2500 foreclosed properties to investors as
rentals. The bulk of these properties are already rented, which
means buyers get a turn-key investment with instant returns. In
the meantime, multi-family housing starts were up over 14% in
January from December and have been rising steadily as developers
look to cash in on high rental demand and relatively low supply.
Multi-family REITs are seeing big returns.
So what exactly is the tipping point, given that mortgage
availability is still tough, consumer confidence in housing is
still weak, and employment, while improving, is still not where
it needs to be to spur strong buyer demand? 'While it seems that
rents are rising at the expense of home values, the opposite is
true. A thriving rental market will stimulate home sales, as
investors snap up low-priced inventory to convert to rentals.
That, in turn, will lower the number of homes on the market,
which will eventually help put a floor under the value of all
homes,' says Zillow chief economist Stan Humphries. More supply
of rental homes, especially single family, could slow the upward
trajectory of rent rates, which in turn would make renting more
attractive and buying less so. It just raises a red flag to see
home affordability at a record high, investors rushing in, and
rents so strongly outpacing home values."
Banks to face tough reviews
Banks will face stiff penalties and intense public scrutiny if
they fail to live up to the standards of a $25 billion mortgage
settlement with state and federal authorities, according to court
documents filed as part of the deal Monday in federal court in
Washington. While the broad outline of the deal was announced
last month, the mechanics of the agreement that took more than a
year to negotiate were laid out in Monday’s filing, including
exactly how much credit the five banks would receive for varying
levels of loan forgiveness and just what kind of conduct from the
past is off-limits to future investigations. Banks must review
their adherence to the new rules every quarter through a random
sampling of cases, with a maximum threshold for errors at 1% in
some cases if they are to avoid fines. “Any error that is found
during the sampling process will have to be corrected,” the
official said. In some cases, servicers would face civil
penalties of up to $1 million for each violation of Monday’s
consent order. Repeat violations could bring fines of $5 million
each. An independent monitoring and enforcement office is being
set up under the agreement, to be paid for by the banks, that
will be led by Joseph A. Smith Jr., the former North Carolina
banking commissioner.
The complaint, which specifies the terms of the settlement, comes
nearly 18 months after reports of “robo-signing” and other
abuses in the foreclosure process set off a nationwide furor, and
marks another legal milestone in the wake of the bursting of the
housing bubble and the financial crisis of 2008-9. The five
banks covered by the settlement - Bank of America, JPMorgan
Chase, Wells Fargo, Citigroup and Ally - engaged “in a pattern
of unfair and deceptive practices,” according to the complaint.
Besides failing to perform modifications for borrowers seeking to
ease the terms of their loans, the documents also cite what
consumers have been complaining about for years: lost
applications and other paperwork, inadequately trained staff and
wrongfully denied modification requests.
WSJ - rise in Phoenix housing shows the way to recovery
As home prices continue to drop in most cities, a nascent
real-estate rebound here holds lessons for the rest of the
country. This sprawling desert metropolis was one of the hardest
hit housing markets during the bust. Phoenix home prices declined
55% from 2006 through the end of 2011, and Arizona's foreclosure
rate jumped to No. 3 in the nation in 2009. Hundreds of thousands
of homeowners are underwater. Now real-estate economists across
the country are studying an early but surprisingly broad Phoenix
turnaround. The sharp drop in home prices has brought new buyers
into the market. Unlike other markets where housing recoveries
have been snuffed out by big overhangs of homes for sale and
foreclosed properties, inventories are lean here. "Phoenix has
hit a bottom," says Thomas Lawler, an independent housing
economist who was one of the first to warn six years ago that
prices in overbuilt metros were poised to fall. The nation's
hard-hit housing markets face a tough act: engineering a housing
recovery without traditional trade-up buyers, many of whom are
either unwilling or unable to sell because of huge price
declines.
Phoenix has found a viable formula. Low prices are igniting
demand from first-time buyers and investors who are converting
the homes to rentals. The local economy is on the upswing with
several big employers like Amazon.com Inc. and Intel Corp. hiring
again, which is further increasing demand for housing. And the
region is benefiting from a surge of buyers from Canada who are
using their favorable exchange rate to scoop up bargains in the
desert. Local mom-and-pop investors are also playing key roles
in soaking up supply. Out-of-state buyers accounted for
one-quarter of all purchases last month. One in every 25 sales
went to a buyer that listed a Canadian address when registering
the sale, according to the Cromford Report, a local real-estate
publication. Many are flush with cash from a real-estate boom of
their own in Canada and an exchange rate that has given Canadians
unusual buying power.
Nationally, housing demand still remains weak and bank-owned
sales are expected to rise this year, putting more pressure on
prices. Many economists say they expect home prices nationally
could fall by another 3% or so this year before hitting a bottom
next year. Most expect that prices will rise little for several
years. US home prices fell another 2% in the fourth quarter on a
seasonally adjusted basis, according to the Standard &
Poor's/Case-Shiller index tracking 20 cities. But prices rose by
2% in Phoenix, the biggest increase of any metro area in the
country. Over the past year, prices in Phoenix are down by 1.2%,
the smallest drop since its prices started falling in 2006. Big
price drops, like those in Phoenix, are another key. In Detroit,
prices are down by 46% over the past six years and have fallen to
levels last seen in 1994. Sales have picked up in Miami, where
prices are down by 51% over the past five years.
But low prices alone haven't been enough to so stabilize other
epicenters of the housing bust where job growth still lags. In
Las Vegas, where prices have tumbled 62% since 2006, including
8.9% over the past year, the local economy is heavily dependent
on tourism and gambling, both industries that haven't recovered.
"A lot of markets in the country have hit a bottom, but I just
don't see them coming back the way Phoenix has," says John Burns,
a homebuilding consultant in Irvine, Calif. The improving
housing market in Phoenix isn't much comfort to anybody who
bought a home there a few years ago. More than 52% of mortgage
borrowers owe more than their homes are worth, according to
CoreLogic, a real-estate data company. And not everyone in
Phoenix is convinced that the improvements will last, especially
if the economy falters or oil prices soar. Phoenix saw a small
run-up in prices three years ago when federal tax credits spurred
a buying frenzy, but prices dropped again once the credits
expired. Others worry that banks have delayed foreclosures and
will begin to saturate the market with more properties in the
coming year.
Small business optimism up
Optimism among small business owners may be increasing at a
“glacial” pace, but it’s “mostly headed in the right
direction.” That’s according to William Dunkelberg, chief
economist of the National Federation of Independent Business and
keeper of the Small Business Optimism Index. The latest survey of
819 NFIB members showed indications that small business owners
are starting to spend, and could even ramp up hiring in some
sectors over the next few months. Respondents to the February
survey expressed optimism about their expectations for higher
real sales, an increase in inventories and positive earnings;
these three things taken together helped push the index up 0.4%,
to 94.3, the sixth straight increase in the monthly index.
Inventories have decreased for many business owners in the past
month - 20% of respondents reported reductions - which is good
news for an economy that needs spending to make it grow.
Capital outlays, too, are being planned, according to the survey.
“The capital spending number keeps going up,” he noted.
“It’s the highest we’ve seen in years.” While still far
from normal, he said, “Even if it’s just to fix a leaky roof,
business owners’ capital expenditures are rising.” In the
past month, more business owners also added workers - 12% of
owners added 3.4 workers per firm. The November elections, as
well as the uncertainty surrounding health-care reform, are
causing some business owners to remain on the sidelines, said
Dunkelberg, waiting to see the outcome of both before committing
to spending and expansion. “There is a lot of political
uncertainty between now and November,” he said. Still, the
trend, at least for now, is upward. And for many business owners,
even a slow improvement is better than movement in the other
direction.
Foreclosures to jump in 2012
Analysts expect between 900,000 and 1 million homes will move
from delinquency into REO in 2012, back to levels seen before the
robo-signing slowdown. Servicers moved roughly 800,000
properties through the foreclosure process and into REO
liquidation in 2011, according to RealtyTrac. After resolving
affidavit problems late last year, banks began moving more
properties through the process. JPMorgan Chase analysts expect
repossessions to reach as high as 900,000 even with a wave of new
alternatives to foreclosure. "Several major policy changes in
the last few months have sped up resolution of the pipeline. Of
course, new delinquencies will ensure that full resolution will
still take years, but the pace may be faster than we expected,"
analysts said. Daren Blomquist, vice president of RealtyTrac,
said that pace could return this year. "For 2011 we hit 804,423,
not quite the 825,000 we were on pace for because of a slowdown
in November and December," Blomquist said in an interview. "We
are expecting close to 1 million REOs in 2012 as some of the
delayed foreclosures finally complete the process this year."
The pace began to pick up in January but is still down from 2011.
Servicers repossessed 66,500 homes that month, up 8% from
December but down 15% from one year ago. Just because a property
moves into REO doesn't mean it will be resold that year, either.
For instance, Freddie Mac data shows the GSE had to wait an
average of nearly 200 days to unload an REO. According to
Blomquist, there were nearly 538,000 REO sales in 2011, roughly
two-thirds of all homes repossessed that year. About 2.6 million
loans, or half of the total delinquency inventory, will be
removed either through modification, short sale or a traditional
repossession in 2012, Chase analysts said. The AG settlement
guidelines released yesterday could result in 500,000
modifications, according to Chase. The Treasury Department
expanded the Home Affordable Modification Program in January to
allow more borrowers to qualify and provide higher incentives for
principal reduction.
Analysts still expect the changes to result in relatively few
additional modifications, roughly 140,000 added to the 220,000
permanent workouts under the program estimated this year. If so,
HAMP workouts may outnumber the 270,000 proprietary
modifications, which have routinely outsized HAMP in the past.
Chase analysts also expect the Fannie Mae and Freddie Mac bulk
REO sales and rental programs to reach as high as 100,000
properties. A pilot program began in February to sell just 2,500
Fannie-owned homes. Roughly 500,000 short sales could occur in
2012, roughly one-third of all liquidations — which include the
900,000 expected repossessions and the new rental program as
well
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