Brokers are more and more confident in the intermediary sector, an upward trend that has been consistent with the results of the past two quarters. 3% more brokers than in the previous month say they have greater confidence in the industry. The majority consider that the main reason for their increasing confidence the lower rates generated by the funding for lending scheme.

‘It is encouraging to see increasing confidence in the sector over the last quarter. Whilst the economic outlook remains challenging, we are seeing a slight easing of funding pressures, leading to an increasing number of lenders reducing rates and launching new products to the market, providing further optimism,’ said Ian Wilson, head of Halifax Intermediaries.

While they are confident in the segment, brokers are less confident in the performance of their own business, the survey showing a 2% decrease from the previous quarter. The good news is that of those who still believe in the success of their firm in 2013, the percentage of those being very confident is higher.

The average number of cases written per broker went up in 2012, reaching 70.25, while the 2011 value for the same indicator was of 64.25. The competitive rates offered in 2012 were the cause of this increase. In Q4 of last year, cases from home movers and first time buyers were stagnant, remortgages and buy to let applications dropped. Brokers also stated there had been an increase in the volume of specialist buy to let lending and remortgage activity in 2012, reporting a year on year growth of 17% and 1% respectively. Overall, brokers reported an increase in the volume of specialist buy to let lending and remortgage activity last year, up 17% and 1% respectively, compared to 2011.

Courtesy © Rafael Ben-Ari – Fotolia.com

Sales for 2012 were up to 367,000 units, or the most since 2009, according to the report.  The so-called Obama Administration Scorecard from HUD reveals a market in flux. The below key component of the report

• Home prices showed 12 month gains 
• President Obama’s foreclosure programs continue to help those in need
• And HAMP also continues to help many stay out of foreclosure

Still, even with these broad headlines across the front page of the report, digging deeper into the December Scorecard (PDF) it seems clear the report contains some “hollow data” too. For an instance, reporting on refinancing by owners in a graph like the one below, does not say much when compared to refinance overall. In short, the administration seems to be taking credit for system and cylical trends here.

Courtesy The Office of Housing and Urban Development

“Housing Councillors Serving Millions of Families”, “Homeowner Savings from Reduced Mortgage Payments”, and other charts used in this latest report do little beside suggesting “Hey, we are doing stuff up here.” Or at least this is a fair assessment for some.

A final criticism here has to go to whomever wrote the texts for this report. In the most politically correct town, in the most politically correct country on Earth, HUD offers a stab at America’s “irresponsible mortgagees” here:

“Millions of responsible families who had made their monthly payments and had fulfilled their obligations saw their property values fall. They also found themselves unable to refinance at lower mortgage rates.”

Does this mean all those “irresponsible” slackers now out of their homes, or “taxing” the system for assistance and counselling did less somehow? Sorry to bring this up in a  news report, but the lingo here stymied me. On the one had bureaucrats expect their constituents to swallow charts and numbers hook-line-and-sinker, and on the other make no bones about dancing on the pride of those families hit hardest by the Great Recession?

We look forward to your thoughts on this aspect.

The predicted market trend were based on what would happen after the government investigation into faulty paperwork on the banks providing home loans’ side. After all foreclosure investigations would have been concluded, there would have been a large number of homes that then lenders would resell, thus causing the drop in prices. However, two years after the government stepped in to investigate and even after the five biggest mortgage servicers in US settled the case with the federal and state regulators at the beginning of 2012, the wave of foreclosures still failed to come. The big players paid $25 billion, but the deal with banks also meant they were forced to cut deals with homeowners.

Data from the National Association of Realtors shows the index of pending home resales climbed 5.2% in October, while the median price for home sales in the same month was up 11% from 2011, the steepest annual increase since November 2005. Not such a big surprised if one considers the fact that 309,385 borrowers were given loan relief by the five largest U.S. mortgage servicers since March 2012. A report by Joseph Smith released in mid November shows a little under 22,000 borrowers had principal forgiveness totaling $2.55 billion, while another 113,000 borrowers won bank approval for short sales, meaning $13.1 billion in principal writedowns.

The wave of foreclosures seems even further with federal government loan-modification programs and as interest rates that reached a record low led to a spike in mortgage refinancing, helping homeowners to keep up their payments by decreasing the sums they have to pay every month. “The Federal Reserve Bank of New York had estimated that as many as 1.8 million properties would be taken back by banks in 2012. Yet through October, there have been only about 559,000 home seizures, according to RealtyTrac,” state John Gittelsohn and Prashant Gopal of Businessweek.

“In hindsight, by delaying and prolonging the foreclosure process, that gave the market time to stabilize and get back on its feet,” says Daren Blomquist, vice president of RealtyTrac, which warned a year ago that huge numbers of foreclosed homes were going to hit the market. “Maybe bureaucracy is actually helping, in this case, to diffuse the impact of the foreclosures. Talk about unintended consequences.”

While the number of properties for sale is extremely low, it does not mean there were no foreclosure sales. Institutional investors such as Blackstone Group and Colony Capital have actually bought thousands of foreclosed properties in bulk, long before they hit the market, but instead of reselling them, they chose to rent them.

While the facts contradict expert’s predictions, massive foreclosures hitting the market is still quite the threat, especially as a quarter of US homeowners still owe more than their property’s worth and as the economy has not made a full recovery as of yet.

Photo source

The implementation of these new divisions mean mortgage servicing companies can now look to Nationwide Appraisal & Settlement Network to handle their appraisal management needs, knowing the job will be done by a team who understands the servicing business model.

Joni Pilgrim, Director of Sales & Marketing at the company commented on the new divisions, saying:

“In addition to our operations team who facilitate appraisal needs for our Mortgage Banker, Portfolio Mortgage Lender, Correspondent Mortgage Lender, Direct Mortgage Lender and Wholesale Lender clients, we have developed and implemented three divisions to facilitate the needs of very specific client types. Those divisions include Reverse Mortgage, Hard Money, and Mortgage Servicing.”

“We believe that the incorporation of these divisions will help to promote a better understanding of the products these clients offer to their borrowers. The team members in each division act as a resource to the borrowers, the appraisers, and the clients by having a strong understanding of what these clients do and what our role is with each of them as their Appraisal Management Company.”

Nationwide Appraisal & Settlement Network is a resource and partner in the loan servicing sector and most of its clients handle all the operational aspects of mortgage lending. In addition loan servicing companies manage loss mitigation, default management and the foreclosure property. Nationwide Appraisal & Settlement Network is able to help these clients through offering quality valuation products, assisting them during the loan process.

The company also offers batch ordering functions to enable multiple appraisal requests to be processed at the same time. Nationwide Appraisal & Settlement Network is based in Florida.

Image courtesy Ricardo Carreon via flickr

The plan is to purchase $40 BILLION per month in Mortgage Backed Securities “until such time as unemployment reaches an acceptable level”. But Bernanke’s statement omitted any direct benchmark as to what an “acceptable” unemployment number would be. And, the big question that few in the main stream media have asked is “How in heck will purchasing MBS’s have a direct impact on unemployment?” But I suppose the answer is that as long as you protect the big banks from collapsing under the weight of mortgage assets that are worth less than one-half of their face value, you are essentially protecting the economy from further job losses. This post from John Wu helps explain what Bernanke is really doing.

Everyone at the Fed is well aware of how unpopular another trillion dollar banking bailout would be if the public actually KNEW that the taxpayers were about to pony up another 2 or 3 trillion dollars to help the banks out, not to mention politically unpopular in a big election year.

So, Bernanke is doing this for “the man on the street” to help grow more jobs and reduce unemployment. It’s the one angle that the public will tolerate, and besides most people have no idea what Mortgage Backed Securities are, and how buying them actually impacts the economy.

We’ve had QE1, QE2, and Operation Twist since November of 2008, growing the FED balance sheet by TRILLIONS of dollars. Yet unemployment is still above 8% “Officially”, while private analysts using real numbers (not government accounting gimmicks), placed the unemployment level for August 2012 at 22.8%.

Housing is still in the tank. Mortgage credit is still very difficult to obtain, and home sales have improved only marginally. At present mortgage rates are around their lowest level since 1956, yet this has failed to jump-start the housing market. It’s very difficult to see how buying trillions more in MBS’s will result in a different outcome than we’ve already seen.

No, the real strategy here is to cover up a second bailout of banks and the bad assets they are holding. When Bernanke says “prices are not rising”, or “Inflation remains low” he’s not referring to YOUR food prices or YOUR inflation rate, he’s referring to the value of bank owned mortgage’s or Mortgage Backed Securities. In his world, inflation is non-existent and deflation is the real problem. If you live atop the banking and finance pyramid, as Bernanke does, you see the problem in a totally different light.

Bernanke obviously believes that saving “main-street” means funneling money to the big banks for as long as necessary. And that’s exactly what an open-ended QE3 is really about. It’s a very dangerous position Bernanke is taking. The market fundamentals that are keeping home values low and delinquency rates high are like a tidal wave which Bernanke seems to believe he can hold back with a large bucket of sand.

In fact, Reggie Middleton, of BoomBustBlog.com has called Bernanke out on this and says that Bernanke is “lying through his teeth“. The general media just accepts it as if it were a normal occurrence. Middleton further points out that if Bernanke were interested in reducing unemployment, he could purchase SBA bonds and funnel the money directly into loans for small business, and hit the unemployment problem directly at the business level.

Instead Bernanke has chosen to force interest rates even lower, continue to prop up the banks, and buy MBS’s for as long as it’s needed. The direct beneficiary of this policy is the big banks who will be unloading their mortgages at what will likely be a much better price than they’d get if they were forced to sell them on the open market.

So the same game of hiding toxic assets, that began with the 2008 crisis is continuing today – pump up the banks and hope that the housing market and broader economy begins to recover before the dollar totally collapses.
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Donna S. Robinson is a real estate market analyst, investor, author and speaker in Atlanta, GA Follow her on twitter at donnaconsults and read her blog at her website: RealtyBizConsulting.com

The basic idea is to keep people in their homes but use the government power of eminent domain to condemn the properties.  Once the properties are condemned then it will be easier for borrowers who are upside down on their mortgages to restructure their loans with a new lender based on what their properties are actually worth instead of what their original loan amount was.

This proposal is being pushed forward in states hit the hardest by the foreclosure crisis like California, Nevada and Florida.  San Francisco-based Mortgage Resolution Partners says condemning underwater loans and taking the ability to modify them away from the private lenders and bondholders is “the only practical way to modify mortgages on a large enough scale to solve the housing crisis.”

The concept of eminent domain is nothing new and has been around for hundreds of years.  It allows the government to seize private land for the good of the community.  It can do so for any number of reasons such as the property is a hazard to the community, is in someway dangerous, is part of an urban renewal project or if it is just in the way of a planned bridge or highway.  Eminent domain has been well supported in the courts and there are several legal precedents that could support this concept.  However in this case it would definitely be controversial since eminent domain has never been used to take  mortgages away from financial institutions and private lenders.

In their proposal, Mortgage Resolution Partners wants to find institutional investors that will work with local governments by providing billions of dollars to pay for the condemnation process so the tax payer will not have to foot the bill for the legal costs involved in such a widespread use of eminent domain.  The government would then take title to the loans and pay the private investors off based on what they consider to be fair market value also using the money put up by these institutional investors.

These new loans would be restructured so as to allow homeowners in distress to reduce their payments to an amount they could actually afford.  The plan then is to sell these restructured loans to hedge funds, pension plans and the like in order to raise the capital needed to pay back the institutional investors who financed the project.  Mortgage Resolution Partners would act similar to a mortgage broker on all of these new loans and collect a fee.

“We are intrigued,” said Gregory Devereaux, chief executive of San Bernardino County, which is east of Los Angeles and has one of the highest unemployment rates in the state. “Our economy in this county can’t be turned around until a large proportion of the mortgage crisis has been addressed.”

“The private sector provides all the financing and all the risk with this program,” said Steven Gluckstern, the firm’s chairman and a former money manager and former owner of New York Islanders hockey team. “We have watched state (and) national government try to fix this and it hasn’t worked.”

While this whole concept sounds promising the reality of the situation is the lenders involved who would be getting paid far less than the amounts they are owed would fight this use of the eminent domain power in court.  Their argument would be the power was never intended to be used for this purpose and to do so would go beyond the scope of the legislative intent behind the creation of eminent domain.

The entire process could be an exercise in futility since the lenders involved could potentially delay this matter in the courts so long that the foreclosure crisis will have solved itself by the time a decision on the legality of using eminent domain in this way is reached.

“Spotlight on the Government’s Growing Monopoly of Consumer Lending and Private Debt: Outstanding consumer debt totals over $12 trillion, constituting 44 percent of all outstanding private debt (both consumer and business). Home mortgages ($9.8 trillion) and student loans ($0.9 trillion) comprise the two largest asset classes within the consumer debt sector.

In 2011, the Government Mortgage Complex accounted for 88 percent of all first-mortgage originations in the United States, with the government also controlling an estimated 90 percent of the student loan market. The government’s growing dominance in the home mortgage and student loan categories is cause for concern, posing a threat to private investors, borrowers, and taxpayers.”

Since the 2008 melt-down, government backed loans have become the dominant player in the housing market. This fact creates a much higher level of risk for the U.S. housing market going forward, as it becomes more and more dependent on government borrowing and public debt.

The Government Now Has A Monopoly On The Mortgage Market

This is the mother of all moral hazard. It’s doing much more of the same thing that got us into the housing bubble originally. Only this time, we’re using government borrowing to fund the mortgage market, instead of private sector investment.

When the government pumps large amounts of money into lending for home mortgages, it’s risking borrowed money, on higher-risk, “low down payment” loans. This in-turn tends to drive home prices higher by making money easier to borrow than it might be in the private sector. If prices begin to rise the tendency is to make more loans at higher and higher prices. After a few years you have a true bubble that is totally dependent on the ability of the government to continue funding it. The government either borrows more and more money, or it may choose to print more dollars. In either case, it’s a model that destined to fail at some point.

Government funded mortgage lending costs borrowers a lot of extra money. In fact, given the low down payments involved, plus the fees added to the cost of these loans, borrowers are much more likely to end up “under water” or in default on these loans.

There are lots of important points that are made in the FHA Watch about the insolvency of FHA, with their government accounting schemes that would be illegal in the private sector. It’s FHA Insurance that backs the vast majority of these mortgages.

FHA pays off on claims filed by lenders who have a mortgage loan that goes into foreclosure. When the lender files a claim for FHA insurance, it’s the taxpayers who actually pay the claim. Since 2008, FHA’s total delinquency rate has grown to almost 16%. That’s compared to the historical pre-boom norm of about 3.5%.

This amounts to billions in potential future losses and new public sector risk, being created on a monthly basis. In short, we are propping up the housing market with money the government has mostly borrowed. This also diverts billions in funds that would otherwise be available for lending in the private sector.

In effect the government’s attempts to prop-up the housing market could be our un-doing, because of the risk that’s being taken on – financing high risk loans with borrowed funds.

The government expansion into mortgage lending has been dramatic. On January 1, 2008, government lending stood at 40% of all mortgages. Today it’s 88% of all new mortgages. In just 5 years, private sector investment has been all but replaced with a government controlled mortgage market for the vast majority of potential home buyers.

A government big enough to fund the entire mortgage market is a government that will either totally control the housing sector or totally destroy it, or both.
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Donna S. Robinson is a 16 year veteran of the real estate industry. She offers real estate investment consulting, analysis and training for real estate investors. Her website is www.RealtyBizConsulting.com

Ben Bernanke acknowledges that mortgages are harder than ever to obtain. Image courtesy of trackrecord

Bernanke, speaking at a Chicago banking conference last week, said that while banks have made significant progress in overall lending (taking into account other forms of finance such as auto loans and credit cards), they are consistently extra cautious with regards to mortgage finance. Lending standards have become so tough that even those with the cash to make a 20% down payment can face problems when trying to obtain credit on a home.

Acknowledging the problem, Bernanke was quick to caution that there should be no return to the days before the housing crisis, when banks were issuing mortgages to just about anyone who asked for one:

“A return to pre-crisis lending standards wouldn’t be appropriate. However, current standards may be limiting or preventing lending to many creditworthy borrowers.”

Numerous economists and real estate professionals have cited the difficulty in obtaining a mortgage as one of the biggest hurdles to cross if a full housing recovery is to materialize, reports Reuters.

According to US Housing Secretary Shaun Donovan, it’s estimated that around 10% to 20% of creditworthy buyers are unable to secure a mortgage due to the current tight lending standards at present.

Danilo Rizzuti / FreeDigitalPhotos.net

Find the sweet spot that will get the lender to agree to your offer

Hertzog says lenders don’t just pick a figure out of thin air – they do their homework. So you’ll have to do yours. Lenders will either order an appraisal or request a BPO (Broker Price Opinion) to estimate value, so Hertzog recommends offer amounts within about 5%-8% of fair market value.

“This doesn’t mean banks won’t accept an offer that’s below their target price, but it does mean you’ll have to make a compelling case for the price you bring. Guessing will only get your offer rejected, so make sure you can back up your price with cold hard facts,” Hertzog said. Hertzog says this includes providing accurate rehab estimates (if known).

Know the reasons short sale offers are rejected

Reasonable short sale offers are rejected – sometimes in record time. Hertzog says the number one reason he sees short sale offers rejected is one most real estate agents don’t consider: fuzzy math.

Because mortgage insurance guarantees so many mortgages, lenders have to decide whether to foreclose on the borrower, collecting on the insurance policy, or consider a short sale as a viable alternative. “Lenders will never tell you this, but they keep their trusty calculators handy. If they’ll profit more from a mortgage insurance-backed foreclosure than they will a short sale, that’s what they’ll do. And it doesn’t matter how much you offer.”

Constant Communication is crucial

Because short sale transactions have so many moving parts, it doesn’t take much to derail a short sale. For this reason, Hertzog recommends short sale agents rely on an effective system of keeping all parties informed of a short sale’s progress.

“I use Short Sale Genius because it was built specifically for short sales. It’s not as important that you use a specific software application as it is that you develop and implement a system that works for you. If you can’t keep everyone informed along the way, your short sales won’t go smoothly, or buyers could get jittery. If this happens, or the buyer isn’t kept in the loop, they could walk away from the deal. Then you’d have to start over from scratch, and hope you can find a new buyer before the foreclosure process plays out.”

Hertzog sees short sales dominating the real estate market for the foreseeable future. He said Phoenix is currently seeing more short sales processed monthly than REOs and foreclosures – combined. “Short sales are currently 27% of closed transactions. In Phoenix, this is huge.”

Hertzog notes that, while short sales can be a great way for real estate professionals to increase their incomes for the foreseeable future, not everyone should try. He recommends only experienced, knowledgeable real estate agents dip their toes into the short sale pool.

“You need to know what you’re doing. Short sales aren’t for brand new agents. Remember, you’re supposed to be looking out for your clients’ best interests. To be honest, until you have some experience under your belt, you should stick to doing what you know – selling houses traditionally.”

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Ken Speegle is a direct response copywriter, ghostwriter, and conversational writing specialist. He works with real estate agents, brokers and investors to expand their reach with conversational writing. By working with Ken, his clients are able to focus on their strengths instead of trying to figure out the best way to use the written word to make more money. For more about Ken Speegle, visit him on the web at www.therealestatewriter.com or by email at info@therealestatewriter.com. Ken personally responds to all inquiries.

Emerging housing trends this summer - ddpavumba / FreeDigitalPhotos.net

Intense Competition

Housing affordability has never been so high, thanks to super-low mortgage rates and steadily declining home values. As such, more buyers are emerging out of the woods to take advantage of the situation – and all of a sudden, there’s a lot of intense competition where there was none.

Investors especially, are muscling on to the scene in growing numbers, tempting sellers with their all-cash deals, which means that those needing to finance a deal are facing stiffer competition than they’ve had to deal with in quite a while.

According to Jed Smith, MD of Quantitative Research at the NAR, the circumstances have never been as encouraging for investors as they are now:

“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest.”

For first-time buyers especially, the competition for the best deals on the market is going to be a lot tougher this summer, adds Smith.

Homeownership Becomes More Desirable

One of the quirks of the housing market at present is that homeownership these days is for many people, more affordable than renting a home. Due to this, growing numbers of renters are beginning to desire a home of their own.

We can already see signs of this – according to a survey by Kingsley Associates, just 59.5% of tenants are planning to renew the lease on their home, the lowest number recorded since the beginning of 2009.

Mortgage Costs Increase

Despite home affordability remaining at record lows overall, some home buyers are seeing a slight increase in their mortgages. Fannie and Freddie, and the FHA have all increased their loan fees in recent weeks, and these costs will be passed on to homeowners.

Ed Conarchy of Cherry Creek Mortgage, Gurnee, Illinois, states that this will be a problem for buyers who lack high credit ratings, as they’ll be forced to take an FHA loan, leaving themselves stuck with the increased fees.

FHA mortgage premiums have gone up to 1.75% of the total loan amount, and so those buyers who can only afford a small down payment can expect slightly higher premiums with an FHA mortgage.

In addition, borrowers with more expensive mortgages can also expect to pay increased premiums soon. Starting in June, the FHA is going to raise its annual insurance costs for mortgages valued over $625,000.

Source: Bankrate, Inc.