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1  Politics, Religion, Science, Culture and Humanities / Politics & Religion / New Home Sales Jan on: February 25, 2015, 09:58:42 AM
Wow.........I am impressed with the New Home Sales Recovery

2  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: February 23, 2015, 08:45:31 PM
Absolutely Bubble Mentality at work.

BTW, see the Housing Starts for Jan and also the Existing Home Sales.  Certainly there is no Housing Recovery ongoing, contrary to what people think.  Looks like a downward trend from Jun on. And looks like levels are equal to 1999 activity.  (Don't forget, these are seasonally adjusted.)

3  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Looking for Modification Scenarios on: February 20, 2015, 09:51:36 PM
I am now heavily involved in a False Claims FHA action regarding  HAMP modification issues. We are looking for people who have:

1. Been in active modification processing or an actual modification or trial modification and who were foreclosed upon.

2. People who have been in active modification efforts for over 2 years and keep getting denied.

3. People who were given Trial Modifications and after making the payments, were denied for modification.

4. People who were given modifications, but began missing payments shortly after because the terms were so bad.

All applicable cases will go to the Department of Justice to be used as evidence of wrongdoing. The DOJ is targeting the largest servicers, including Nationstar, Ocwen,  B of A,  Chase, Wells, IndyMac, SPS, SLS, HMSI. I will be personally reviewing the facts and documents of each case to determine whether it meets the parameters of what we are looking for.

There is no guarantee that it will benefit the specific homeowner. However, each case sent to DOJ by me will show evidence of wrongdoing. Worst case, a homeowner could use the DOJ having the case to influence the servicer to consider modifying the loan.

This evaluation is of no cost to the homeowner. If you know of anyone that could be applicable, they can email me at for more details.
4  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: February 20, 2015, 09:36:51 PM

I have problems with this analysis.  Here is why:

1. The authors cite Debt to Income being a 2 and use the formula of Gross Debt to Gross Income. This alone shows that they know not what they speak. Debt to Income is Monthly Debt Payments to Monthly Gross Income. This is the standard calculation for mortgages. Under traditional guidelines DTI would be no more than 28%  for housing and for total 36%. During the Housing Boom, it became 45% and then up to 55% or more.

2. There was another method that was always considered optimal and was similar to what the authors said, and that was a 3.5 ratio, Price to Income. Using that formula, everyone under bought in their scenario.

3. They write that "First, mortgage lending wasn't aimed mainly at the poor". True, but it was aimed at non qualified borrowers after 2003. By late 03, qualified borrowers no longer existed that loans could be sold to. So lenders dropped standards, issued state income loans, and if you had a detectable breath in the last 24 hours, you were qualified.

4. Borrowers were assumed to reflect the average characteristics of residents in these neighborhoods. But the new study examined the actual borrowers and found this wasn't true. Comparing borrowers to residents.....did they account for the fact that in poorer neighborhoods investors were heavily buying?

5. Third, the bulk of mortgage lending and losses — measured by dollar volume — occurred among middle-class and high-income borrowers. True, but they are looking at people buying much more expensive homes. The reality is that homes in the Midwest, South and most areas were far less expensive than in the Sand States. So this would distort things measurably.

6. Specifically, they question the notion that the main engine of the bubble was the abusive peddling of mortgages to the uninformed poor. In 2006, the poorest 30 percent of borrowers accounted for only 17 percent of new mortgage debt.  At this point, I get totally pissed off. The reason is that the homes they bought were far less expensive than in Ca and elsewhere.

I have reviewed over 5000 defaulted mortgages in depth. I have also done statistical analysis on over 10 million GSE loans. I can tell you that lower middle and lower income people bore the brunt of the damage (think $50k or less). They were targeted with products that they did not understand, and could not afford.

As I learned in the past two years with people I was working with, statistical analysis is only as good as the assumptions you make. And when you go into a project with preconceived ideas, the work you do will have a bias towards the conclusions that you are trying to determine.

Damned academics should go back to their ivory towers and hide. They should not be seen or heard.

5  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: January 30, 2015, 04:09:56 PM
Make that 5 - 6% defaults on the GSE loans based upon 180 day defaults.

BTW, the reason that Basel went 180 days is that when a loan defaults, the lender has to carry greater amounts of regulatory capital and loan loss reserves. So using 180 instead of 90, the lender reduces reserves on these type loans by about 50%.
6  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: January 30, 2015, 02:48:42 PM
Ed Pinto is a sharp guy. He nails it with this article.  For a timeline of events with the GSEs leading to their fall, check out the following link to a pdf.

Pinto also does a Monthly National Mortgage Risk Index where he evaluates the Risk of loans defaulting. The methodology was similar to what I have developed in Phase 1 of my work, using FICO, LTV and DTI to determine default but he used 180 days late as the default measure. Using these measures, he finds that default risk for GSE 2014 originations is at 11%, and for FHA, about 23%.  (This is the pdf link to describe how he does it.

This is the link to the current report.

I do have problems with his methodology.

1. He uses 180 day delinquency for his measure, a Basel 3 designation. I would use 90 days. The reason is that 90 days is the standard for a loan being considered and in default. Once a loan goes 90 days late, the cure rate without any type of modification is less than 5%. So, using 180 days results in rates that are much less severe than 90 days, and in my opinion, are misleading.

2.  He used DTI for the income portion of the risk measurement. I used it initially and found problems with DTI when I started to consider actual cash flow and ability to pay/residual income measures.

What happens with DTI is that borrowers who have larger loan amounts have a greater residual income that lessens default risk. For example, a $400k loan, 43% DTI,  would feature a guy with much greater income and ultimately larger residual income after all debt service and living expenses, than those who have a 43% DTI on a loan amount of $200k or less. In fact, the guy who has the $200k loan amount or less, dependent upon family size, could have a negative residual income. And if your are talking about a family of 4, with 43% DTI and a loan amount of $150k or less, negative cash flow becomes an almost certainty.

The problem for Pinto calculating Residual Income is that the  available data did not have the data needed, so assumptions on income, debt and living expenses had to be calculated. I did so, and then ran the statistical analysis and found that the use of Residual Income for default was much more effective as a default indicator than using DTI.
Of course as I mentioned previously, lenders would have to deny loans using my methodology, so they did not want it.

The great part is that the new QM loans have ability to pay determination requirements. They can use either DTI or ability to pay, and will jump on using DTI so they do not have to deny doing loans and earning that profit. Meanwhile, I sit waiting for the defaults to mount, especially with FHA. Then I hit them hard.

7  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: January 08, 2015, 05:30:08 PM
Just a few comments:

Where the housing pundits miss the boat is that they just look at charts and graphs and then make assumptions. There is no underlying analysis of the factors that contribute to the housing "recovery" nor analysis of factors that will affect it in the future.

1.   With DougMacG’s graph, notice that about 1991 the beginning of the upward trend. Coincidently, that is when Bush 41 began the idea of increasing homeownership from about 64% to 70% or more.  Clinton then followed that up with programs designed to get maximum ownership.

2.   1993 saw a huge push by the GSE’s to begin to control the mortgage market. Banks, especially after the S&L crisis were considered risker for loans than the GSE’s.

3.   1991 saw the first real successful MBS issuance since about 1985 with Ameriquest securitizing a $61m offering.  By 1993, other Wall Street firms and Mortgage Bankers began to approach the MBS market. The target loans were those that the GSE’s would not buy.

4.   1993 saw the creation of a “working group” to create the methodologies that would be needed for future lending. The Banks, Wall Street, GSE’s and Mortgage Banker Associations were the major part of the working group. In 1995, its findings were complete and led to the creation of MERS. 1996 saw the first loan registered under MERS.  The beginning of large scale securitizations was set in place.

5.   About 1993 and later began the loosening of Leverage Ratios for Wall Street firms.

6.   1998 saw the repeal of Glass Steagall and now commercial banks could now engage in Wall Street type actions.

7.   Mid 1990’s saw greater emphasis on the Community Reinvestment Act. DOJ and other regulatory actions to promote “Fair Lending”.

8.     With the 2000 Market Crash and then 9-11, the Fed actions to loosen credit which promoted greater housing sales.

9.     Jun 22, 30 year interest rates hit 4.25% for one day, and the following day the Fed announces that they will begin to increase rates again. Jul 2005 saw the market top in "sales activity" with values falling in many areas and in some areas, continuing to increase at about a 5% yearly increase until the summer of 2006, when things went "dead".

10.   Dec 2006, the first Mortgage Bankers begin to fail. "Say goodnight to housing and hello to foreclosures."

When you look at the combined history of what occurred to facilitate the Housing Boom, then it becomes readily evident that what the Fed and the government has done since has been a total failure.

Fed actions have not been about stimulating a recovery. It has been about keeping the banks afloat with QE, getting the toxic assets off the books of the banks and out of Investor hands.  Right now, 75% of all Private MBS have been retired or else foreclosed. What is left is probably mostly held by the Fed.

Much of the hot money used to provide investors the ability to buy foreclosures and at risk homes was a deliberate action to prop up values. The reason is that Negative Equity was a key determinate in foreclosures when it hit 120% LTV or greater. At 120%, stressed homeowners began to look at home ownership as a negative. Why be finally stressed if values would not recover for years? As the stresses mounted, a homeowner was more likely to default.

At 140%, default became much more likely for stressed homeowners. Additionally, 140 saw a new motivation for default to occur. Homeowners who could make the payments began to buy more desirable homes, paying less than what they owned on their "smaller" and "less desirable" home. After the purchase, they moved into the new home and let the old home go into default.

At 160%, wholesale strategic defaults occurred.

The Fed needed to prop up values, so they have lowered rates, engaged in QE and attempted many other things to prop up values by stimulating housing. It has not worked.

Now, the GSE's and FHA are going to 97% LTV and lowering credit requirements. They are also allowing  more down payment assistant programs. At 97% LTV, default rates are 15.96% from the 2002 to 2008 years. They know that defaults will increase, but at one banker told me, if 85% of the loans do not default, then they are ahead of the game. 15% is not a big deal if they have reserves for losses.  (BTW, 81% LTV is the "break even point" for foreclosures. Above 81% and lenders begin to lose money on foreclosure sales.

What happens when rates increase? Payments go up, so to offset the payments, home values will drop.  Oops, that means more Negative Equity which will lead to more defaults. Also, credit lines increase in payments, living expenses increase, and disposable income goes negative. More defaults follow.

Currently 4m loans are delinquent. 800k plus loans have been modified by HAMP and the payments are beginning to increase. (400k other HAMP have already re-defaulted.)  2.5m lines of credit are now "resetting" with higher payments. ARM loans will have payment increases again when interest rates increase. More delinquencies and foreclosures to follow.

How is the Fed going to counter this?

BTW, I am no longer involved with the people I had been working with to bring to market new Underwriting and Ability to Pay evaluations. What happened is that we were told by Mortgage Bankers and Banks that using my model, they would have to either decline loans, or else the sellers would have to accept less of a sales price to sell the home, or else the buyer would have to find cheaper homes to buy.  Additionally, they did not want to know the risk of default with borrowers because it increased their liability if borrowers defaulted under the new Dodd Frank.

The solution for my "partners" was to take the system and "hide" the risk. Risk evaluations would be done and the lender could turn them on or off as desired. However, our system would still record it.  At this point I left them. They are now marketing the system as they revised it, and apparently have a couple of trial clients.

What the idiots do not realize is that by hiding the risk and allowing it to be turned or off by the lender, for every loan that is funded and sold to the GSE's or FHA, or any other party, they and the lenders are now "engaging in a conspiracy to commit fraud". These fools never learn........

8  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: December 28, 2014, 12:21:21 PM
New home sales are so great per Wesbury and others .............this really shows the truth.

9  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: October 02, 2014, 02:13:35 PM
Notice that Wesbury does not mention his data sources............just that the sources are believed to be accurate and reliable.  I would suggest that he look at other measures to determine whether Mortgage Credit is loosening or not.  The MBA has one such measure.  it does not show any real change in overall.

Also, the MBA Purchase and Refinance Index continue to reflect poor finance activity.  Here is the link to it.

IMO, Webury remains full of shit...

Mortgage Credit Availability Index (MCAI)

Mortgage Credit Availability Unchanged in September

Higher Index=More Credit Available
Lower Index=Less Credit Available

Mortgage credit availability remained unchanged in September, according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA), which analyzes data from the AllRegs® Market Clarity® product.

The MCAI remained unchanged at 116.1 in September. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. The index was benchmarked to 100 in March 2012.

Last month, MBA began reporting on two additional measures of credit availability as part of the monthly MCAI release: the Conventional Mortgage Credit Availability Index and the Government Mortgage Credit Availability Index, with historical data back to 2011.

The Conventional and Government MCAIs, which are component indices of the Total MCAI, are constructed using the same methodology, and are designed to show relative credit risk/availability for conventional and government (FHA/VA/USDA) loan programs. The difference between the component indices and the total MCAI is first, the population of programs they examine, and second, the "base levels" to which they are calibrated. Using data from the MCAI and our Weekly Applications Survey, MBA calibrated the Conventional and Government indices to better represent where each index might fall in March 2012 (the "base period") relative to the Total= 100 benchmark.

Although the Government MCAI decreased slightly and the Conventional MCAI increased slightly, both the Conventional MCAI and Government MCAI changed less than one percentage point.

The Total MCAI has an expanded historical series which gives perspective on credit availability going back 10 years (expanded historical series does not include new Conventional or Government MCAI). The expanded historical series covers 2004 through 2010, and was created to provide historical context to the current series by showing how credit availability has changed over the last 10 years - this includes the housing crisis and ensuing recession. Data prior to March 31, 2011, was generated using less frequent and less complete data measured at six-month intervals and extrapolated in the months between for charting purposes.

MBA has partnered with AllRegs® to produce monthly MCAI, which feeds current mortgage underwriting parameters into a single index number to capture whether overall mortgage credit is more or less available from month to month.

The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit.
10  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Aug Pending Home Sales on: September 29, 2014, 10:23:42 AM
Thought I would post the Pending Home Sales for Sept.  Once again, we see it falling.  Some key points:

Approximately 35-40% of the Pending Sales will be cancelled due to either Appraisal Issues or else loan denials, etc.

Yan states: “Fewer distressed homes at bargain prices and the acknowledgement we’re entering a rising interest rate environment likely caused hesitation among investors last month,” he said. “With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home.”

Distressed homes are down only because of government modification programs that are only temporary fixes for up to 5 years, at which time when payments increase the problems begin anew for those homeowners which number about 7 million loans. Plus 4 million loans are currently delinquent or in default. 2.5 million 2nd Lines of Equity are beginning to reset with payments hundreds of dollars higher, and when interest rates increase, this gets even worse. 2 million plus adjustable rate mortgages left over from the crisis which when rates increase, those loans will begin to re-default.

Add to home conditions that higher interest rates will depress home prices which creates more Neg Equity loans and which increases likelihood of default. Add in the fact that incomes have fallen for people with mortgages, (though Yan says otherwise) the financial stresses will lead to more defaults.

First time borrowers have been falling to about 22%. Increased interest rates will cause further decline in the ability to qualify until values begin to drop. Even then, this will not significantly impact purchases except to drive investors back into to market.

It is being reported that among first time buyers, over 50% are having down payment help from family members. Over 30% of down payment assistance loans default. FHA is the haven for first time home buyers with and without down payment assistance. Expect defaults to increase.

The major lenders are pulling back on FHA due to the risk of defaults and buybacks, even with QM standards. Many lenders are running from QM loans as well for the same reason, as well they should. There is an "unseen" trap with QM that is waiting to nail lenders doing QM on defaulting loans.

BTW, how does Yan expect first time buyers, or others for that matter, to be able to afford 5% yearly increases in home values if they can't afford homes now?  Also, how can he ignore the current delinquency conditions of homeowners, the re-default risk on modifications, and the 2nds and Adjustable Rate loans that will default?

It is nice that one can live in a "tunnel vision world" where you can ignore any negative factors that do not support the perspective that you want to sell. For this, Yan earns the idiot of the day award, which will then go to Wesbury when he comments on this.

BTW, when I mentioned above about the banks walking away from QM and FHA loans, the shift is to Mortgage Bankers doing the loans instead. Their goal is to do the loans as long as they have QM approval. They do not care about the Ability to Repay provision. As defaults occur with the riskier loans, many of the MB will fail because they do not have the asset base to repurchase defaulted loans.  (When a loan defaults, it loses approximately 50% of its face value minimum, unless it is severely modified. Add in the legal costs and borrower damages, and it is not going to be "pretty".)


Pending Home Sales Fall Slightly in August

WASHINGTON (September 29, 2014) – Pending home sales slowed modestly in August but contract signings remain at their second-highest level over the past year, according to the National Association of Realtors®. All major regions experienced declines except for the West, which rose for the fourth consecutive month.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 1.0 percent to 104.7 in August from 105.8 in July, and is now 2.2 percent below August 2013 (107.1). Despite the slight decline, the index is above 100 – considered an average level of contract activity – for the fourth consecutive month and is at the second-highest level since last August.

Lawrence Yun, NAR chief economist, says contract signings are holding steady and fewer distressed sales and less investor activity is likely behind August’s modest decline. “Fewer distressed homes at bargain prices and the acknowledgement we’re entering a rising interest rate environment likely caused hesitation among investors last month,” he said. “With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home.”

According to NAR’s Profile of Home Buyers and Sellers, 81 percent of first-time buyers in 2013 who financed their purchase obtained a conventional or FHA loan. Overall, first-time homebuyers have been less prevalent from the housing recovery, representing less than a third of all buyers each month for the past two years.

Yun says first-time buyer participation should gradually improve despite tight credit conditions and the inevitable rise in rates. “The employment outlook for young adults is brightening and their incomes finally appear to be rising,” he said. “Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years.” 

The PHSI in the Northeast slipped 3.0 percent to 86.5 in August, but is still 1.6 percent above a year ago. In the Midwest the index fell 2.1 percent to 102.4 in August, and is 7.6 percent below August 2013. 

Pending home sales in the South decreased 1.4 percent to an index of 117.0 in August, unchanged from a year ago. The index in the West rose for the fourth consecutive month (2.6 percent) in August to 102.1, but still remains 2.6 percent below August 2013.

Existing-home sales are expected to be stronger in the second half of the year behind improved inventory conditions, continuously low interest rates and slower price growth. Overall, Yun forecasts existing-homes sales to be down 3.0 percent this year to 4.94 million, compared to 5.09 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5 and 6 percent this year and 4 and 5 percent next year.
11  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Aug New Home Sales Soar on: September 24, 2014, 01:54:21 PM

I have a confusing puzzle for you.  You probably saw this.  (Remember, this comes from the Census Dept)

Sales of US new homes soar in August

WASHINGTON (AP) — U.S. sales of new homes surged in August, led by a wave of buying in the West and Northeast.

The Commerce Department said Wednesday that new-home sales climbed 18 percent last month to a seasonally adjusted annual rate of 504,000. The report also revised up the July sales rate to 427,000 from 412,000.

Newly constructed homes sold at the fastest clip since May 2008. It's a clear sign of improvement for a real estate market that has been muddled in recent months, as the rebound in sales following the housing bust began to slow.

Sales of new homes are up 33 percent over the past 12 months. Median prices for new homes have risen nearly 8 percent during the same period to $275,600.

"All is not perfect in the housing market but things are certainly better today than they were about one year ago," said Dan Greenhaus, chief strategist at BTIG brokerage.

In the West, August purchases of new homes soared 50 percent compared to the prior month. Off the sharp August increase, sales in the West have nearly doubled in the past 12 months.

Between August and July, sales grew 29.2 percent in the Northeast. Buying increased 7.8 percent in the South and remained flat in the Midwest.

The housing market has been sputtering for much this year. A nascent recovery in sales and prices began to struggle toward the middle of 2013. Ferocious winter weather delayed construction and limited sales at the beginning of 2014. Buying did pick up over the summer. Yet the pace of sales has been depressed by sluggish wage growth and the price surge last year that put homes out of reach for many Americans.

While new-home sales did show greater strength in August, they are significantly below the 1990s pace of more than 700,000 sales a year, said Tom Showalter, chief analytics officer at Digital Risk, a mortgage analyst company.

"We're well below historic norms," Showalter said.

There are signs that another housing uptick may be in the works.

The National Association of Home Builders/Wells Fargo builder sentiment index climbed in September to 59, the highest reading since November 2005. Readings above 50 indicate more builders view sales conditions as improving.

But greater builder confidence has yet to translate into more construction.

In August, homebuilding fell 14.4 percent compared to the prior month to a seasonally adjusted annual rate of 956,000 houses and apartment complexes, according to the Commerce Department.

Much of that decrease was in the volatile apartments sector. Homebuilders started single-family houses at an annual rate of 626,000 last month, slightly below the pace of 631,000 in August 2013.

Existing home sales have also eased back compared with last year's pace.

Purchases of existing homes fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August, the National Association of Realtors said this week. Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward. Overall, the pace of home sales has dropped 5.3 percent year-over-year.

Here is the puzzle for you.

seasonally adjusted

Total                     Total        Northeast           Midwest         South         West               
July Sales              427k           24k                    58k             243k           102k
Aug Sales              504k           31k                    58k             262k           153k   

non seasonally adjusted

Total                     Total        Northeast           Midwest         South         West               
July Sales              38k               2k                    5k                22k             9k
Aug Sales              41k               3k                    5k                20k            13k 

Interesting Puzzle, isn't it?  The South has decreased sales, but adjusted numbers show a 19k gain. Total Actual Sales across the country increase by 3k, but perthe adjusted numbers, this amounts to yearly gains of 77k and not 36k.

Once again, we see the government manipulating the data to make things look better than what they are.  Wesbury and others will claim how great things are, but will not have even enough sense to look at the raw numbers.

Can anyone explain?

12  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: August 20, 2014, 09:16:35 AM
Now, for the comments on housing from a guy I am starting a joint venture with.....for much better understanding of reality, you read this guy and not Wesbury.....

I Don’t Care What the Media Says, Housing Market is Horrible, and Homeowners Still Suffering through the Loan Mod Process

I know what sorts of headlines run rampant through the media these days. It’s nothing new… it’s been going on non-stop since at least 2008. It’s also utter and complete nonsense.

Housing market horrors…

Now, I said this would happen so many times last year, that it’s annoying to have to repeat myself, but the housing market has been hit by yet another foreseeable perfect storm. To begin with, ever since the president’s Making Home Affordable program was announced, we’ve been refinancing the same people over and over again, this last time around at rates as low as 3.5 percent fixed.

So, that ended last July and won’t return because even the almost-all-powerful Fed can’t get rates low enough to pull the same trick again, so although there will always be some that refinance, any sort of refi boom is DOA.

And then there’s all them new-fangled rules, supposedly put in place to right the wrongs that caused the mortgage and housing meltdown… Dodd Frank, the CFPB, TILA, RESPA… and anyone who thought these new rules wouldn’t suppress home sales was simply delusional.

Of course, all of these things are on top of the rest of the problems we’ve neglected to fix for the last six years. Underwater homes are still a huge problem.
The national average is only 20 percent, but no one sells their home to break even, so when you factor in sales commissions, moving expenses and the need for a 20 percent down payment, the percentage of homes underwater is… I don’t know… HIGH. Like, it wouldn’t surprise me to find out it’s over 70 or 80 percent, not that anyone has any incentive to find out. And most of whoever is left probably likes their home and doesn’t want to move.

The evidence is abundant…

During the fourth quarter of 2013, Black Knight reported that origination volume dropped below 400,000 mortgages for the first time since 2011. And by year-end, we were at the lowest point since mid-2008 when volume plummeted to around 300,000, and it felt like the world might not make it through the bloodletting.
However, mortgage originations during the first quarter were pathetic, down some 70 percent year-over-year at Citi and Chase, and its safe to assume elsewhere as well. Then the second quarter was similarly bad… originations were down 66 percent year-over-year at the end of Q2.

Now, the American Enterprise Institute (AEI) has reported that, “potential default rates remain nearly double the 6 percent maximum AEI says is conducive to a stable market, suggesting there’s been no “discernible impact from QM [Qualified Mortgage] regulation.”

Unnamed AEI researchers were quoted in DS News as saying: “Risk in the mortgage marketplace remains perilously high.”

So, that’s all very encouraging in terms of pointing to the obviously bright future ahead, as I’m sure you’d agree.

All done waiting for the kids to come home?

Zillow and Puulseonomics, whoever they are, just published the results of their study of why “millennials” are still not buying homes like no one thought they would.
Apparently, “a panel of economists, real estate experts, and market strategists” has finally found the courage to agree publicly that “the median age of first-time homebuyers is likely to keep moving up in the next decade,” because they’ve all concluded at long last that the millennials have decided to sit out the carnage and not buy homes until later in their lives.

You know, later in their lives… like maybe the times of their lives when they have jobs, can qualify for loans, and aren’t still watching their parents, aunts and uncles losing homes every year, because those sorts of times would seem to be worth waiting for as far as house hunting is concerned.
Hey, maybe some of the millennials are simply waiting to buy their own parent’s home after foreclosure as an REO. What? It could happen.
The National Association of Realtors said that the typical first-time homebuyer in 2013 was 31 years old, but a significant number of “experts’ sais they think the average age will go up to 34 or even older in the years to come.

Homeownership in the United States today is at a 20 year low, and the Zillow/Pulse study reported that the largest declines are among “younger and early middle-aged Americans,” which could mean that many of the older folks have already lost homes to foreclosure, like maybe over the last six years, or that the older homeowners have become too much of a pain in the neck to foreclose on, I’m not sure which is more likely.

Of course, student loan debt and bleak prospects for good jobs were cited as the only culprits, which just shows me that they think that collectively we’re dumber than a stump.

Household formation is still down at levels never before seen in this country, and there’s simply no need to buy a home until you’ve got a household to put in it. And household formation is likely to be down in part because of student loan debt, but also because fewer people want to get married when they’re poor.
And as to the big picture, the survey concluded that, “it’s way too soon to conclude that the market has healed and returned to the old normal,” thus establishing for all to see that it is they who are dumber than stumps. (Does that last sentence make me something less than a serious journalist, or just someone who tells truth to power?)
Triple Celebrity Foreclosurcide…

And speaking of power, Burt Reynolds has lost his motion in a Florida court to have his foreclosure thrown out, instead the judge told Bank of America to proceed with the foreclosure on his waterfront Hobe Sound home known as Valhalla. Merrill Lynch filed the foreclosure action in 2011, after Burt fell behind on his payments.
Witnesses on the scene said that Burt, asking that the court call him “Lewis,” turned to them and said: “Sometimes you have to lose your house ‘fore you can find anything.”

Actress Mischa Barton, former star of “The O.C.” is officially in foreclosure, after the bank filed a Notice of Default this week on her Beverly Hills property. Barton is said to have bought the place for $6.4 million in 2005, when presumably she was still a famous movie star. Now $100,000 behind, reported that she’s been trying to unload the place since 2010.

Her mortgage is approximately $4.25 million, so it would seem that she’s down over $2 million since she bought it, and couldn’t sell it for what she owed. She even tried renting it out for $35,000 a month, but couldn’t find another member of the nouveau riche crowd to over-pay to live in the place.

Just further evidence of how red hot the Beverly Hills housing market has gotten over the last couple years as home prices have reportedly skyrocketed to 2006 levels… apparently everywhere but in the 90210.

Rounding out the celebrity trifecta is former heavyweight boxing champion, Evander Holyfield, whose failed business ventures, two divorces and hefty six-figure annual child support bills, have lad him to recently lose his 54,000 square foot mansion complete with 109 rooms, bowling alley and in-home theater, to foreclosure.

It took nearly four years for JPMorgan Chase to take ownership of the shopping mall size home in Fairburn, Georgia for $7.5 million. Holyfield reportedly owed north of $14 million. So, is that another example of home prices recovering? Georgia mansions are still down by 50 percent? How low were they?

Sources say that Holyfield never applied for a loan modification, but if he had, my advice to Chase would have been that they place armed guards, motion sensors, and video surveillance all around the Holyfield file 24 hours a day in a fire proof environment in order to make sure that his paperwork could not be lost under any circumstances. I would not want to be the guy that lost his paperwork, would you?

Loan modification madness…

With all of this swirling around us every day, the news continues to report only that economic recovery is sweeping the nation. That anyone still listens to such fanciful tales, let alone believes them, is amazing to me. The only explanation I can come up with is that optimism is a very hard thing of which to let go.

But we all know the real deal, we can feel the truth about the economy, we know what recovery feels like and this is not it.

Every month, foreclosures are supposedly down or coming to an end, until they’re up in Illinois, or breaking records in Connecticut… the numbers are always manipulated, and there’s no money in telling the truth about the whole mess, so no one does.

Although I couldn’t prove it, because I don’t keep track of the specific numbers, I think Mandelman Matters is a valid barometer for what’s going on with foreclosures and loan modifications. I hear from homeowners everyday from all over the country and those I can help in some way, I help. So, if the news about foreclosures were true, I’d know it.

Yes, for some homeowners loan modifications are easier to get than they have been in the past, but that’s not to say the process is easy or fun by any means. The people who have it the easiest are those with W-2 income and one home, who aren’t more than a year behind.

But, for the self-employed with a rental property who are more than a year behind… it’s like playing Pin-the-Tail-on-the-Donkey barefoot in a pitch black room filled with dangerous objects and broken glass all over the floor. It’s not impossible, by any means, I see these sorts of cases get approved every week, but it’s next to impossible without some sort of real expert guidance.

I wish I could do more to help more people, but I’m just one person and I can’t really afford to do what I do now. And the problem is, it’s obvious that our government, both state and federal, have essentially given up on doing anything more to make anything better. So, I fear this is it.

If you’re reading this and need help, especially if you’re with Bank of America or Ocwen, but also if you’re with Chase and/or a few others like SPS, SLS… maybe even Nationstar, you can contact me at And if I can help you in some meaningful way… I certainly will.

People ask me why I continue to do what I do all the time now… and I wonder about the same thing myself every few hours on some days. The reasons are below… from one homeowner I spoke with just a few days ago… and another I’ve never spoke with, but who I apparently helped anyway.
13  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: August 20, 2014, 09:09:57 AM
Once again, Wesbury is promoting a poor analysis.  Here is why.

1. Raw data has Multi Unit up by 11.6k units for the month.  Multi units are mostly apartments.  This does not help single family which is the real area of importance for a housing recovery.

2. Single Family increased 2.9% over the Jun numbers. 

Jun was 606k seasonable adjustments (for the year)
Jul was 656k

Stupid dumbshit is basing it on numbers with seasonable adjustments.

3.  Real Single family number show

62.2k for Jun
61.6k for Jul

So let's promote the seasonably adjusted numbers while we ignore the raw data which does not meet the message we want to project.

What a joke........
14  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 31, 2014, 10:11:39 AM

To go with your Collections post about the 35%, here is some more numbers to put things into a better perspective. Per the Fed

33% of all people have no revolving debt.
33% of the people have less than $1000 in revolving debt.
The remaining group has all the rest of the revolving debt.

Dependent upon the source, the "average" revolving debt in the country is from $8k to $15k.  (The differences are based upon what is considered revolving debt.)  So if 66% of all people have $1000 or less in revolving debt, imagine what the real numbers are for those who hold all the debt.

15  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 24, 2014, 04:44:02 PM

Such rubbish from Wesbury.

Why are people deciding to rent rather than buy? 

1. They can't afford the homes and the loans.
2. Income growth is stagnate except for the upper class.
3. 50% of current homeowners cannot sell due to low or negative equity.
4. 25-34 age group doesn't have the money to buy thanks to student debt.
5. Home construction is bouncing on the bottom still, even with poor analytics to derive the numbers.
6. Homeownership is still higher than traditional norms.  We should be no more than 63% and not the current 65%.

Yes, financing is still more difficult that the past, but does anyone seriously want to go back to the go-go lending of 2005?  Also, check out FHA.  15-20% default rates within the first two years of origination.  That is huge.  And that is what idiot Wesbury wants to go back to.

Wesbury, you are out of the game. Go to the locker room and play with your buddy Krugman.......
16  Politics, Religion, Science, Culture and Humanities / Politics & Religion / New Home Sales plummet on: July 24, 2014, 09:41:48 AM
Will Wesbury and others start to believe that the party is over?  Or is this the result of potential buyers deciding to go on a June vacation after school ended.  Waiting with baited breath for the excuses.......

New Home Sales Plummet

WASHINGTON (AP) — Sales of new U.S. homes plunged in June, a sign that real estate continues to be a weak spot in the economy.

New home sales fell 8.1 percent last month to a seasonally adjusted annual rate of 406,000, the Commerce Department said Thursday. The report also revised down the May sales rate to 442,000 from 504,000.

Buying of new homes fell 20 percent in the Northeast, followed by less extreme declines in the Midwest, South and West. The modest sales caused the inventory of new homes on the market to increase to 5.8 months, the highest since October 2011.

The median sales price was $273,500, up 5.3 percent over the past 12 months.

Home sales had been improving through the middle of 2013, only to stumble over the past 12 months due to a mix of rising prices, higher mortgage rates and meager wage growth.

The pressures from mortgage rates have eased since the start of 2014 and the pace of price increases have slowed. Still, other indicators suggest that home-buying has stalled after rebounding from lows reached during the Great Recession.

The National Association of Realtors reported that sales of existing homes increased 2.6 percent in June to a seasonally adjusted annual rate of 5.04 million homes. It marked the first time that sales have been above the 5 million-mark since October.

Economists were encouraged by the second straight monthly gain in existing home sales, though those sales are still hovering below the recent peak of 5.38 million sales hit last July.
17  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Jun Existing Home Sales on: July 22, 2014, 01:59:17 PM
Happy times are here again. NAR cites Existing Home Sales up

2.6% Month over Month

Seasonally Adjusted Rate of 5.04 million homes per year.  (Of course, take the Seasonally Adjusted Rate for Jun and multiply by 12.  Ignore what the amounts were in previous months because that would offer a different set of facts.)

I am  probably not allowed to say this according to NAR rules, but Year over Year Sales are down again, for the 8th month in a row.  (Damnable facts.)

If we take actual sales for the first 6 months of the year, it is 2,319,000 total sales.  Seems that this number is much under the 5.04 annual rate that NAR cites. 
And don't forget that the Buying Season is pretty much over and total sales monthly will begin to decline again no later than August.  Guess that 5.04 rate is not going to hold up for the year.

18  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 18, 2014, 09:10:25 AM
At least Wesbury admits that Single Family have been flat for the last two years.......

But single family is the key to housing recovery. Multi units are apartments and condos for the most part. They do not stimulate Single Family actions in any meaningful manner, except for condo purchases which are generally people who could not buy single family.

BTW, Chase is bailing out on FHA lending. Too much risk as I have been saying all along. Chase represents just over 2% of FHA lending and dropping down to probably 1.5%.

Mortgage bankers are now up over 50% of all lending activity, if current reports are correct. But that is in an environment where mortgage lending has dropped 72% from last year levels.

First time buyers are now about 20% of activity, down from traditional levels of 35-40%.  And most are FHA, of course.  Moveup buyers are lacking in traditional numbers like first time buyers.  And with the hot money investors leaving the market, watch out.

Pay attention to Phoenix. The party is over there.....again.....Homes sales are down considerably and home values are falling again.  Vegas will be next.
19  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 17, 2014, 10:32:36 AM
I am sure he has already thought of it.

Here is another article about what is happening with mortgages.  In this piece, the writer is speaking about the mortgage banker.  In 2007, the mortgage bankers were the companies who failed because they could not repurchase all the defective mortgages. So, the potential for the same pattern exists again.

Combine this with what I wrote about having their heads buried in the sand on QM mortgages and not wanting to know the risk, and things will heat up quickly.

I have already prepared the homeowner arguments to be filed in lawsuits alleging that lenders did not adequately consider ability to repay the loan.  The way the arguments are set up, Safe Harbor will not protect the lenders. I will be releasing this to attorneys in the next couple of weeks.

The banks and the GSEs are not going to change their practices. I have reached the point where I now believe that the only way they will respond is to make it truly painful for them.  The Regulatory Lawsuits being settled do not offer pain. When you look into the details, the pain is actually on the investors who own the MBS. The required principal reductions and modifications are where the bulk of the fines go.

Fannie, Freddie making risky deals with small lenders: watchdog
WASHINGTON (Reuters) - U.S. housing finance companies Fannie Mae and Freddie Mac are making riskier deals as they increasingly purchase mortgages from smaller lenders, a federal watchdog said on Thursday.

The government-owned companies do not lend money directly, but underpin the U.S. housing market by guaranteeing most new mortgages in the country.

The Federal Housing Finance Agency Office of Inspector General said in a report that the purchases from smaller lenders raises the exposure of the two companies.

"Smaller and non-bank lenders may have relatively limited financial capacity," the watchdog said. "The enterprises face an increase in the risk that those counterparties could default on their financial obligations."

Fannie Mae and Freddie Mac, which were seized by the U.S. government in 2008 during a housing market implosion, purchase loans from lenders and package them into securities that are then sold to investors.

In the past, the two companies bought most of their loans from the country's largest banks. Small lenders generally dealt with larger banks, who in turn sold them to Fannie and Freddie.

However, tighter regulations have made big banks such as Bank of America Corp and Wells Fargo & Co reticent to buy loans from other lenders, so more small banks and non-bank enterprises now sell directly to Fannie and Freddie.

Freddie Mac's top five mortgage sellers provided 70 percent of its loans in early 2011, but only 44 percent in late 2013, according to the report.
20  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Jun Housing Starts on: July 17, 2014, 09:12:37 AM
Hey Wesbury and you other idiots bulls:

What happened to Housing Starts?  Here was the most positive spin I could find to post.  Maybe Wesbury can use it to draw up his latest report.

Apr, May and Jun are supposed to be the best months for housing, and this is all we get?  Interesting that this happens as housing inventory is increasing, existing sales are down year over year, pending sales are weaker than expected and new home sales are not that great.  Maybe Obama can restart housing by offering all the new illegal children new homes free to live in, and then bring the families in.

Going to be a fun second half of the year.

Housing starts hit slowest pace in nine months

WASHINGTON - U.S. home construction fell in June to the slowest pace in nine months, a setback to hopes that housing is regaining momentum and will boost economic growth this year.

Construction fell 9.3 percent last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday. That was the slowest pace since last September and followed a 7.3 percent drop in May, a decline even worse than initially reported.

Applications for building permits, considered a good indicator of future activity, were also down in June, dropping 4.2 percent to a rate of 963,000 after a 5.1 percent decline in May.

The worse-than-expected June performance reflected a big drop in activity in the South, where construction plunged by 29.6 percent last month.

Analysts, however, said that the June decline in construction may have been influenced by temporary factors such as heavy rain in parts of the South which could have held back housing starts in that region.

Jennifer Lee, senior economist at BMO, said it was too soon to conclude that the housing recovery has stalled. "After all, job growth continues, mortgage rates are near their lows for 2014 and homebuilder confidence has been increasing," she said in a research note.

"In short, much weaker than expected, but the data are volatile and the plunge in starts was all in one region. We view the homebuilder survey as more of trend-setter over time -- it suggests that the weakness in this report be discounted," said Jim O'Sullivan, chief U.S. economist at research firm High Frequency Economics.

The overall weakness reflected a 9 percent fall in construction of single-family homes, the biggest part of the market, and a 9.9 percent drop in construction of apartments and other multi-family units.

All of the June weakness was confined to the South, where about 40 percent of home construction occurs. Construction was up 14.1 percent in the Northeast, 28.1 percent in the Midwest and 2.6 percent in the West.

Home construction has struggled to gain traction this year, limiting its ability to contribute to economic growth. Part of the weakness reflected an unusually severe winter which hampered construction. But rising home prices, a rise in mortgage rates from historically low levels and tighter lending standards imposed since the financial crisis have also been a barrier, especially for potential first-time buyers.

There still is hope that housing will perform better in the second half of the year although Federal Reserve Chair Janet Yellen told Congress this week that the slowdown in housing is one of the concerns at the Fed and that its forecast for an economic rebound may prove to be too optimistic.

The National Association of Home Builders, however, reported Wednesday that homebuilder confidence surged in July, reflecting heightened expectations that the second half of the year will see rising sales. The builders' sentiment index rose to 53, up four points from a revised reading of 49 in June. Readings above 50 indicate more builders view sales conditions as good rather than poor. The July reading was the first month above 50 since January when the index stood at 56.

New home sales surged 18.6 percent in May to a seasonally adjusted annual rate of 504,000, the highest level in six years, while sales of previously owned homes rose 4.9 percent, the biggest one-month gain in nearly three years, to a rate of 4.89 million homes.

Even with the big May increases, sales of new homes are still running at just about half the pace of a healthy real estate market.

Economists expect there is a lot of pent-up demand for homes after many potential buyers put off purchases during the 2007-2009 recession and the weak recovery since that time. Job growth has accelerated in recent months, with an increase of 288,000 jobs in June. That has helped to push down the unemployment rate to a nearly six-year low of 6.1 percent in June.

There is optimism that employers will step up their hiring further in the second half of this year as they respond to a rebound in overall economic growth following a weak winter.

The economy shrank at an annual rate of 2.9 percent in the January-March quarter but analysts believe growth rebounded to around 3 percent in the April-June quarter and will remain around that level for the remainder of this year.
21  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Our Pat on Mortgage Bankers on: July 15, 2014, 11:09:23 AM
I am going to throw out some industry actions that are simply impossible to believe, but absolutely true.  This part concerns Mortgage Bankers.

A Mortgage Banker is not a bank, but is a lender who generally funds on a Warehouse Line of Credit and which will be sold to the GSEs in the end.  Prior to funding, the loans will be run through the GSEs automated approval systems. Once approved, they are funded.  These are the QM loans that you hear about.

A QM loan comes with a Safe Harbor provision whereby a lender is "protected" from Ability to Repay and Duty of Care provisions in Dodd Frank. So the perception is that the loans have no problems.  

The key Ability to Repay component is the Debt to Income Ratio. As long as Debt to Income is 43% or less, or the loan is GSE approved, the Ability to Repay provision is presumed to be met.

Since the QM regs came out, I have been studying the 43%  DTI extensively. Turns outs that DTI is effective only 53% of the time in predicting defaults. Further research revealed that with a 43% DTI, more than 25% of all loans will have a Negative Cash Flow, so unless a borrower changes habits, they will likely experience first year defaults.  (Think FHA with 10% rates.)

Now, Safe Harbor is not really Safe Harbor. Under Dodd Frank, a lender can be sued for Unfair and Deceptive Acts and Practices (UDAP). UDAP can be used even if a practice is legal.

We created a model to identify the Default Risk on any loan, and it has an 82% reliability right now, without having access to a complete loan file.  We have been presenting the model to Mortgage Bankers.  Here is the response.

They argue that if they know the risk of any one loan, then their liability increases. But with Safe Harbor, as long as they don't know the risk, they are protected.  So they don't want to use the model.  

Here is their real problem. Under UDAP, if they fund the loan and it defaults, the borrower can sue them regardless of Safe Harbor. But, if it defaults, they must buy the loan back from the GSEs. And the CFPB and DOJ can come after them for funding loans a borrower could not repay.  However, if they deny the loan, since the loan was approved by the GSEs, they could be sued by the borrower for discrimination or under Fair Lending Laws and also UDAP. And the DOJ and CFPB can go after them for discrimination and Disparate Impact.  

IOW, they are screwed if they do, or if they don't fund the loan.

But here is what we knew and were recently able to confirm. The Mortgage Banker is going to fund the loan no matter the risk. If they don't fund the loan, they decrease their earnings.  (Each loan generally makes about $1500 in total profit.)  So it is do the loan whatever the risk, and make the money. And pray that the loan does not default.

BTW, the banks are of the same attitude.......and the GSEs as well.

22  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 10, 2014, 07:34:46 PM

Let's take Scott's chart and long at it a bit further.

1. Notice the upsurge in Purchases in 2009 and 2010, and then the fall back?  That was due to the Obama Tax Credit of about $8500 per home purchase, if I remember the amount correctly. It simply brought housing demand forward, and the second the incentive stopped, housing sales fell again.

2. Sales start rising again in 2011 with the introduction of QE 2 and QE 3. Now they are bouncing again as QE is pulled back with year over year sales dropping.

3. Interest rates during this latest increase were at the lowest that they have every been on mortgages, and yet you only get that little push upwards. What happens as rates increase.  (BTW, a 2% increase in rates will drop home values about 18%, as historical research has shown.)

4.  With existing inventory as low as it was in 2011 - 2013, buyers went to purchasing new homes............and this is all they got as increases?

5.  BTW, even last year, it was about the 6th lowest year on record..........even worse that when the US population was under 200 million.

Now, you really have to look at the report each month to understand something else going on, and that is the methodology used to arrive at these numbers.  They use statistical sampling from different regions. The reports have a 90% confidence level, meaning that there is huge room for errors.

More important, they round off the numbers.  In each of the 4 regions, they take the estimate sales and round to the nearest thousand.  So, if you have 501 sales, they round to 1000.  How accurate is that?

Plus, the error rates per region are from 12.5% to about 25%.  This means the data is statistically "worthless".  Yet, we are to believe that this is a "successful" recovery.

Right now, the lending standards are so screwed up, it is pathetic.  One of my partners does mortgage loans still. He has a client wanting to buy a home, and it will have a 60% LTV.  Debt to Income is 25%.  His and the wife's income is VERIFIED at $423k per year. 823 Credit Score.  $800k in the bank after the loan closes.  He cannot get a loan because he does not have three credit lines over 2 years old.  He pays cash for everything but this, but that is not being credit worthy.

Meanwhile, FHA is giving out loans at up to 55% Debt to Income, with credit scores as low as 600.  And that is credit worthy?

Unless people pay attention to this stuff daily, and are really in the industry, they have not a clue what is really going on.
23  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 24, 2014, 05:45:14 PM
You also have to look where all the activity was.......

Total increase in actual units sold...........9000 for the month

Increase in the South .....6000 units
Increase in the West ......3000 units
Midwest.....broke even
Northeast.......1000 units

Now, these numbers are rounded............501 is rounded up and 499 is rounded down.  We don't know actual numbers so this could be very deceptive....Law of Small Numbers....

These are also Sampling Surveys with estimated numbers.........could this be subject to the same frauds as the Employment reports on surveys?

Additionally, the "sale" is either contract signed or deposit taken.  That is a lot of room for the sale to "fall out".

Relative Standard Error Rates for


Would you put money on such Error Rates?

Confidence levels are just as pathetic.

BTW, the banks own internal studies are not optimistic.
24  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Specious loan guidelines again on: June 10, 2014, 10:37:44 AM
Angel Oak Funding loan guidelines

1 day out of short sale or foreclosure

Credit Scores beginning at 500 up to 80% ltv and 50% Debt to Income

Bank Statement documentation for Self employed

And people wonder why I am so negative?  Here we go again......
25  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 09, 2014, 11:06:27 AM

If the government is involved, yes. But the plans are to keep the governments out of this at both the state and federal level. It is private enterprise coming together to solve a problem that cannot otherwise be solved.

There is another what was done during the Depression........a 5 year moratorium on foreclosures.  Would that be any better?

There have to be better solutions and if the threat of ED can be used to bring the involved parties together to work towards a solution, so much better.

What people read in the papers or on the internet or airwaves is misrepresenting what is really going on. Foreclosures are not recovering. People are not improving their financial situations. The Housing Market is not recovering.  People are representing otherwise, but going into the numbers reveal an entirely different understanding.

We are talking about another 20% of the country facing foreclosure in the next decade, if nothing is done. What happens when the economy crashes, which it will. What happens when interest rates rise?

The government actions to date have destroyed the refinance industry. Does anyone really think that with interest rates on loans at 3.5%, people will refinance again for other purposes?  Will they want to move up into "better" homes, when they will be paying 6% or greater?

The banks have been laying off residential lending employees by the thousands.  The Mortgage Bankers are doing so as well.  Even worse, their loan volumes have decreased by 70% from one year ago.  Add to this that they made $1,200 per loan origination in first quarter 2014, and they are in real trouble.  By the end of the year, expect that 50% of them will be gone.

Think the new mortgage regulations and QM loans are going to be an improvement?  Think again. Lenders now have a duty of care to the borrower, and under the UDAP (Unfair and Deceptive Acts and Practices) codes, it will likely go to a fiduciary duty. So new loans originated in 2014 and beyond that default will likely go to litigation.

QM?  There is a huge loophole in it which only a few people are aware of yet. When word gets out, lenders will have little or no defense to defend against the lawsuits.

Safe harbor for QM?  That is a joke.  Imagine that 30% of all loans originated under QM are at great risk of default at time of funding.  (We have the proof.)

You cannot believe who fucked up the entire situation is, whether from the foreclosure side, the current lending practices, regulatory oversight, or anything else. We cannot just continue to do things as we are now. New and extreme measures must be taken.
26  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 09, 2014, 10:44:06 AM

What if the ED action actually improves the position of the Investor? What if the Investor gets more in return that could be expected by foreclosure?  That is the bottom line.

Government programs and interventions have failed miserably in stemming the crisis.  Right now, 8m homes have had completed foreclosures, and untold others with Deed in Lieu's or Short Sales.  4 million more are currently delinquent and other 2 million plus modifications have occurred in which 66% will redefault.  That is 14m homes in trouble, or 28j% of all homes that had first mortgages.  Greater than 1 in 4!!!

Even worse, FHA and the GSE's expect that 30% or their current loans will default in the future, and of the subprime done by the GSEs, 67%.  

Also, there are large numbers of ARM's just waiting for interest rates to increase and when that happens, kiss half of those loans goodbye in the first couple of years.

Can the country really afford this?

Absolutely nothing has been accomplished in the past 7 years to resolve the crisis except to delay the problems. The delays are done through phony attempts to modify loans, foreclosure regulations that stop the ability to foreclose, artificial increases in home values designed to "hide" the problems and delay, and programs like HARP designed to lower payments and interest rates to  stimulate a consumer driven economy that is otherwise moribound.

None of the parties involved in the loans are working together to resolve the problems. They are at cross purposes. To give you an idea of the problems:

1. Homeowners have no trust in the lenders and servicers. Those in trouble feel that the serrvicers are out to steal their homes unlawfully. Most of this belief is based upon idiots like the media and Liz Warren expounding ideas that are not true or factual like: 1) The loans were sold multiple times. 2) Robo signing. 3) Poor and stupid modification practices.

2. It is no longer subprime driving the defaults either. It is Prime loans, people who have lost jobs or income, now forced into default. This has been the case since 2010.

3. Modification departments that are nothing more than "loss centers" for servicers. They contribute nothing to the bottom line for a non-bank owned loan, unless servicing fees, late fees and other things can be charged.  Additionally, antiquated processes for doing mods.  Then you have the problems of homeowners who cannot even follow simply instructions for getting in the paperwork for doing mods, committing fraud, strategic defaults, etc.

4. Basel III which has caused bank servicers to be forced to sell servicing rights to the non-bank servicers, which screws up loan mods in process.  If they don't sell the loan servicing rights, increased Basel III capital requirements are implemented.

5.  Regulatory agencies like the CFPB which have taken the position that literally says, "If you are doing something right, but you think it is wrong, then it is wrong".  The CFPB has decided that if you are a lender or servicer, and they come in to audit you, if you have an attorney present, the attorney cannot say a thing or represent you. You have no legal rights!.  

6. Investors who have NO INPUT on what to do regarding a delinquent loan.  The Servicer has all the power to decide.

The entire system is completely broken. No one is talking to another. Even within the lenders and servicers, the departments have no cross communication and no one knows what the other is doing.

ED is actually a "threat" to use the process to bring the parties together to try and workout solutions. It will not work in a city like San Francisco with few foreclosure problems, but for cities that have been severely damaged and the process does not improve, ED could help.

What has to happen is a plan of action put into place that will bring the parties together to work towards a common cause. This requires both the involved parties and independent parties capable of properly evaluating the situation and bring about resolution.

If all parties can work together to resolve a problem like in Richmond or Newark, it will prove that the involved parties can work together for the common good. Then, one can see the beginnings of them working together in a non ED environment.

The strategies are being developed now. The processes and methodologies are being put together.

I came to this decision reluctantly. When first hearing about ED, my thoughts were "Fuck ED and Richmond". Over time, I have reviewed and evaluated things and have come to the conclusion that ED may provide an ability to bring the parties together.

At this time, it is either ED, or another 10 years of doing again and again, what has failed in the past time and again.

27  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 09, 2014, 10:05:34 AM

There are  VERY competent people involved in the ED considerations from what I have seen and heard.  If the process is started, the first city must be done efficiently and in a realistic and short time period, or it will fail.  If it works, it will sweep across the country.
28  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 08, 2014, 09:31:28 PM
  Post reply ( Re: Housing/Mortgage/Real Estate ) 

Re: Housing/Mortgage/Real Estate
The answer to Fair Market Value is

Yes. FMV can be determined.  Furthermore Loss Given Default can be determined also.

Prior to coming to this position, I have looked at the property situation in Richmond carefully. I found that based upon the relevant factors, it actually makes sense to either modify the loans with Principal Reductions, or allow Short Refinances with payoffs of Fair Market Value. But the servicers are preventing this.

You have to look at things from the Loss Given Default perspective.

1.  Loans that go into default and are foreclosed upon are not going to recover the principal due. The property gets sold at a price that the market is willing to bear, but the price will also involve sales commission and other factors as upkeep removed from the proceeds.  The ultimate result is that under the best of cases, the proceeds received with be about 90% of perceived FMV.  All loan amounts and arrearages above the FMV are also lost.

2. Take, Richmond, Newark or other cities considering EC.  Who the hell wants to live in those shitholes with extensive crime, poor policing, bad economic conditions, etc.  Buyer for the properties are few and far between and would involve steep discounts.  Look at Detroit where they can't  even give away properties.

3. So the properties sit vacant and as vacancies increase, values go down further. Or, the properties become the targets of gangs, drug dealing, squatters, and ultimately are damaged to the point where they are worthless anyway.

Under this scenario, ED makes sense.

As to legal, this has been the subject of hot debate.  Lenders, investors and advocates are saying that it would not be legal.  However, others are coming up with legal arguments in support of ED.

ED is accomplished with the Public Interest in mind. Use of ED in this scenario is definitely within the Public Interest.  More
29  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 08, 2014, 01:10:16 PM
Lol......I thought that would provoke a response............

For those who do not know, I have been heavily involved in this entire mess since 2007, working on all sides.  I understand the problems and processes in far greater detail, and the issues involved.

In the last 7 years, there have been all types of programs developed to try and resolve the crisis, HAMP, HARP, Hope 4 Homeowners, National Mortgage Settlement, CA AG actions against Wells/World and the Countrywide settlement among others. What do they all have in common?  THEY HAVE ALL FAILED!!!!

Nothing has worked. Trillions have been spent, and the problems continue.  Foreclosures are postponed so that it now takes years to foreclose on a property. Modifications can take from 6 months to years to get done and when done, all but a few end up re-defaulting.

The Fed buys MBS to promote a housing recovery. They buy because no one else wants the return that even good loans provide, and no one want the crap still out there.  In fact, if you look at the MBS purchases, the Fed buys 95% of all new issues.  Why are they tapering?  Look at the numbers of new issuances, and the taper tracks with that.

Home values are up........only because of Wall Street hot money.  You have a city of 30000 housing units, 10 home sales per month all cash driven driving prices up by 20% for the year.  Yeah, right......does anyone really believe that the crap homes have appreciated.......or is it just market manipulation? 

What is the definition of insanity?  Continuing to do the same thing over and over again, expecting the outcome to be different the next time.

The truth is that if we had let the market crash, the "hurt" occur, and housing to bottom, we would be on the way to the beginnings of a recovery. Instead, we have played games, delaying the pain, and in the end only made things worse for when the crash comes.

Everything is being viewed as a zero sum game, when it comes to the housing crisis. No one wants to give up a thing, and this attitude is only hurting the entire country. 

Key points:

1.  Servicers have no desire to modify loans in a beneficial manner.  They get 25 bps on the total dollar portfolio for servicing performing loans. When the loan goes into default, they get from .50 to 1.25 bps per loan, plus all late fees and other charges they can impose. Plus they can get up to $4200 for ultimately modifying a loan from the government. If they modify a loan in a timely manner, they lose money.  In they do principal reductions, they really lose money.

2. If servicers get sued for foreclosure and modification issues, they don't get harmed. It is the Investor who pays.

3.  The Master Servicer, think Wells Fargo in most cases, gets 10 bps on the servicing. They do not want to do principal reductions due to losing servings dollare either.

4.  The Trustee for the loans who controls the Trust and the Investors, have no reason to perform in a manner that would cut loses for Investors. That is because most of them also originated Trusts.  If they go after the servicers, then they could be also be the recipient of the same attacks on their own servicing actions.

5.  The Investors have no real power to act. To challenge the Servicer or Trustee, they must obtain 50% of the investors in the Trust to join in on any actions. Then they must file lawsuits, and fight to get the documents to prove their arguments.  Ultimately, they settle out of court for pennies of what they could have had for losses incurred. BFD.......

6. Homeowners are either getting "stalled" by the servicers until a foreclosure presents a negative Net Present Value so as to deny a mod, or are given a mod with no ability to perform so the loan will go back into default. They continue to get no relief.

7. Cities are suffering immense harm. Richmond Ca is the perfect example.  The city literally sits across the bay from another coastline, that of Tiburon/Belevedre.  That area is the most expensive real estate in the country, outside of downtown New York. Yet Richmond is one of the worst cities for foreclosure in the country.

12% of homes are in default, and a 20% vacancy rate. Incomes under the national average by 20%.  Crime rate is only surpassed by 5% of all cities in the US. 45% Negative Equity position. Gang and drug activity. Businesses are leaving and not coming into the city. The city has to let go critical servicers like the police to meet depleted budgets.

The servicers are doing nothing to assist the city. The GSEs do nothing. So everyone suffers.

I have seen the agreements on MBS and what can be done or not. The simple fact is that by invoking ED and taking the homes for fair market value, and then getting them refinanced by willing parties, and they do exist, the Investors will actually suffer less losses than if the homes are foreclosed upon.  But that makes too much sense for the Servicers, Banks, MBA and other parties.

ED, if done right, can be used as a model across the US, helping cities and homeowners everywhere.  Furthermore, it can change the adversarial relationship between all parties, and in turn, creative a cooperative relationship where everyone seeks to resolve the problems.

The threat of using ED can accomplish this. It can change the way that foreclosures and modifications are being  handled for the better.

Many argue that ED is unlawful. Those are the same parties that oppose any meaningful efforts because it costs them money.  There is no reason to believe that ED would be anything other than in the best interests of the public domain, which is the legal  standard for invoking it.  The threat of invocation after the first successful ED action would serve to begin the process of having all parties work together to resolve the problems.

30  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Eminent Domain - My views should spark some comments on: June 08, 2014, 11:10:04 AM
Eminent Domain.........expect more new forthcoming on ED.  More cities are going to take it up.

Disclosure: I  was originally opposed to the idea of ED.  I have since changed my mind and find that it is going to be the only possible way to begin to resolve what is going on in many cities in the US.  In fact, I expect that ED will begin to create a complete "sea change" in how foreclosures and modifications are handled if the first ED action is properly done.


This should hopefully provoke some response.
31  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: June 08, 2014, 11:06:14 AM
Thought I would make a couple of comments...........

1. Wesbury continues his"rah rah" real estate projections, without any real analysis of what is going on.  He argues that the 1.3% existing sales gain in April was a sign of this, and expects May to be 2% increase.

Anyone in the industry with a desire for accuracy will say that Month to Month means nothing. It is Year to Year that matters, and YOY is down sharply. But if he wants to argue that Month to Month is important, Spring is the most important selling season, and only 1.3% increase occurred?  That  is so far below historical norms that it is pathetic.
And 2% in May will be just as bad.

He also claims that existing home sales provide little to GPD.  What a friggin idiot?  Existing home sales should be comprised of two types of prgianic buyers.......first time buyers and move up buyers.  Correct me if I am wrong, but don't first time buyers go out and buy home furnishings, decorate and engage in landscaping to their own desires. Move up buyers engage in even more of this behavior.  But I guess that it means nothing to Wesbury because it goes against his beliefs.

First time buyers are down to less than 25% of sales. This is close to a 50% drop. The reason is that there are few qualified buyers and what do exist are buying FHA.........the wonderful FHA with 96.5% LTV loans, and credit scores down to 580.  Great buyers there, no wonder they have a minimum 15% default rate.

Move up buyers are mostly non-existent as well. When Negative Equity, Low Equity and other factors like FICO are factored in, between 60% and 70% of the potential move up buyers are now out of the market. What remains are borrowers with significant equity who have no desire to move, or others with very low interest rates and will not want to buy anew as rates begin to increase again.

The Investor market is shrinking. Blackrock is decreasing its sales for the year by 70%. Other firms are doing the same.  The "new" investors are the Homeowner Wannabees who are buying investment properties now.  Dumbshits missed the boat and are going to get screwed again!

Don't even consider the 25-34 year old cohort.  They haven't the income to buy homes, and the college grads are out of the market for a decade due to student debt.  But hey, maybe Obama will take his pen and wipe that out......

Wesbury talks about the need for new homes in the 1.5m range.  Hasn't anyone told him that new household creation has dropped by 66%?  Who needs 1.5m units when up to 1m household creation units have disappeared.

When he talks about the 943k units started over the past year, look at the numbers. The growth is occurring mostly in Multi Unit properties, in other words rentals.  The home builders know the market has changed.

Oh yes, the housing inventory for sale is increasing and is up to about 6 months so sales are going to increase.  This number has been increasing for months and over the last few months, has been from 4 months up.  Wesbury.......where are the sales that should be occurring?  1.3% increase with 6 months inventory?  What is he going to say when it gets up to 8 or 9 months?

Also, contrary to what Wesbury says elsewhere, foreclosures are increasing again. There are 4m homes delinquent or in foreclosure, and 90% will end up foreclosed upon.  What is that going to do to the market?

The Fannie 3rd Qtr 2013 SEC filing says that 31% of the GSE loans will default. 67% of their subprime will default.  What about this?

I am in contact with Mortgage Bankers all the time. They now do 46% of all new loan originations.  They are all reporting significant drop offs in both refi's and new loan originations.  This is only going to get worse as the year continues.  Many of them are going to end up closing.  (Profit on loan originations for 1qtr 2014 was only $1,223.  Not much in it for a Mortgage Banker to continue operating.)

I DESPISE people who look at the monthly reports, don't do any real looking into what is going on, and yet proclaim all is improving.
32  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: April 03, 2014, 07:29:51 PM
Several reasons they are down all over:

1.  Increased values allow for selling before foreclosure.

2.  Automatic GSE mod approvals for loans that are from 90 days to 270 days late.

3. Private Label MBS is down to about 25% of volume in 2007.  Those loans left tend to be stronger borrowers.

4. Adjustable Rate loans have defacto modifications, thanks to the low interest rates.  Current rates are about 2.75% to 3.25% in most cases.

5. GSE new loan originations have since 2009 been to very strong borrowers.  Default rate is .0025% for those loans.

6. HARP refinances of negative equity loans reduced rates to 3.5% and saved borrowers hundreds per month. 

7. Low income and poor credit borrowers, i.e. Community Reinvestment Act loans, have been greatly reduced, hence less foreclosures.

Watch out for FHA though. It is going to get real messy soon.
33  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 29, 2014, 09:25:29 PM

Look carefully at Housing appreciation. The truth is that Housing as an investment is greatly overstated.  Housing over the long run appreciates at 2-3% per year and nothing more.  The years of 2002-2006 were an aberration, and 2012-2013 will turn out to be similar.

My sources, and they are one hell of a lot better than Wesbury and the National Association of Realtors, are now "hunkering down".  The so called recovery is over, as they will tell insiders. The recovery only existed due to Fed actions and Regulatory Agency actions, and that is being phased out. 2014 is expected to be a "change" year, and unless the Fed steps in again to try and support interest rates, home prices, and MBS values, the recovery is now again in free fall in 2015.

You might have seen Existing Sales reported this week.  It is down Year over Year, just like New Home Sales, but you would have to look hard to see where that was reported.  Home values are also beginning to fall, but it will be several months before that is reported officially.

Even worse, the new Qualified Mortgage Lending Standards are paying havoc with the industry. No one knows yet how the courts will interpret the first lawsuits by homeowners, nor even what constitutes "compliance" with the statutes, so they have been slow to act so far.  In the next few months, they will act, loosening standards because they assume that they are protected under the new QM Safe Harbor provision.  Little do they know what awaits...............there is a hole in QM that if it had been the Super Bowl, Manning could have RUN for 5 90 year TD's in the first quarter alone.

Also,trends to be aware of when thinking of investing in real estate.

1.  The 24-35 age cohort have a completely different view of real estate than previous age groups. They no longer see it as an investment opportunity and recognize it to be likely drag on investments in the future.

2.  Firms who buy homes are "arbitrage" traders. They look for the difference in "spreads", the difference in what they make and what they pat.  As spreads decrease, they bail out, which is what is happening now with Blackstone.  Best way to describe them is a "cloud of locusts" who sweep in from the skies, rape, pillage and plunder, and then move on.  Right now, they are moving on.

3.  The so called drop in foreclosures is artificial as well.  It is going to be increasing again soon, especially as Obamacare hits families over the next year or two.

There is much, much more I could write about, but the important thing to remember is that Housing, just like most things, is not existing as a stand alone function. Far too many factors affect housing and must be considered in any evaluation of what is to come. But the NAR, Wesbury and others ignore those factors because it would contradict what they want to believe.

34  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 21, 2014, 11:20:08 AM

Long time no post from me.  I have been extremely busy with the development of new products for lenders and servicers to solve the problems that they are currently facing.

CD sent me a post from Wesbury, knowing it would piss me off.  Here was the post.

Existing Home Sales Declined 0.4% in February to a 4.60 Million Annual Rate To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 3/20/2014

Existing home sales declined 0.4% in February to a 4.60 million annual rate, coming in exactly as the consensus expected. Sales are down 7.1% versus a year ago.
Sales in February were down in the Northeast and Midwest, but were up in the South and West. The decline in sales was due to slightly lower sales of both single-family homes and condos/coops.
The median price of an existing home rose to $189,000 in February (not seasonally adjusted) and is up 9.1% versus a year ago. Average prices are up 7.4% versus last year.
The months’ supply of existing homes (how long it would take to sell the entire inventory at the current sales rate) rose to 5.2 months in February. The increase in the months’ supply was mainly due to a 120,000 increase in inventories.
Implications: Existing home sales declined 0.4% in February to the slowest pace since July 2012. However, this was exactly what the consensus expected and should not change anyone’s impression about the economy. Existing home sales are counted at closing, and given harsh winter weather in December and January, when prospective buyers would have been placing contracts on homes, it makes sense that sales were weak in February. Besides the weather, another reason for slower sales is a lack of inventory, which could lead some buyers to purchase a new home instead. The good news was that inventories increased by 120,000 units in February and this suggests that the pace of sales will pick up in March and April, as contracts signed in February will show up in March and April sales. Expect more inventory to come onto the market in 2014 as home prices continue to move higher (median prices for existing homes are up 9.1% from a year ago). Also, credit remains tight, making it hard to get a loan to buy a home. This explains why 35% of all sales in February were all-cash transactions. However, we do not believe higher mortgage rates are noticeably holding back sales. The US had a bubble in housing during 2003-05, when 30-year mortgage rates averaged 5.8%. Today they are 4.3%. We remain convinced that the underlying trend for housing remains strong. Also, remember, existing home sales contribute almost zero to GDP, so there will be no noticeable negative effect to GDP from the temporary slowdown in sales. In other news this morning, initial claims for unemployment insurance increased 5,000 last week to 320,000. Continuing claims increased 41,000 to 2.86 million. On the manufacturing front, the Philly Fed index, a measure of factory sentiment in that region, rose to +9.0 in March from -6.3 in February.

My comments:

Once again we see a steaming pile of excrement shoveled out by the National Association of Realtors, doing their best effort to meet the quality of spinning that is regularly done from D.C.  Then people like Wesbury take the data and perform “projectile regurgitation of numbers vomit” and put their own spin on the data, and without doing any independent and in depth analysis.

1.   Sales were down because of weather is a major reason according to the NAR.  You stupid fools!!!!  What do you think Seasonal Adjustments are about?  The Seasonal Adjustment corrects for weather and other factors.  Why then when things are worse does the NAR continue to blame the weather  even after the seasonal adjustments are accounted for?

2.   Did Wesbury even look at the real data? Since Jun 2013, Seasonally Adjusted Sales have fallen from 5.38m to 4.6m.  This is a clear trend line that cannot be spun to the good, even though SA is designed to do just that.

3.   Non SA dropped from 519k to 283k, but that is a number no one wants to report.  You can’t spin raw data so easily.

4.   All four regions, North, South, East and West are dropping in sales volume over the last 9 months.  No one area is increasing.  Year over Year and Month over Month will not report that.

5.   The West dropped by 3000 units in the raw data, but it increased 60,000 in the SA data. 57k in SA adjustments?  Does this make sense? Or is this just pure data manipulation?

6.   For the first time, the NAR blames Student Debt as a contributing factor to lower sales.  I have been screaming about this for three years, and the media for one year.  The NAR and Wesbury only recognize it now?

7.   The NAR now references slowing Investor Sales as a problem, but expects increasing inventory to offset the slowing sales through increased homeowner purchases.  (Blackrock has decreased their purchases by 70% over last year.) After all, without the inventory buyers were “forced to buy” new homes.  Hasn’t anyone told the NRA or Wesbury that new home construction is still at the lowest levels since data started to be kept in 1963?  If inventory increases and people can buy existing homes again, then what happens to new home construction?

8.   Wesbuy does not believe that the increase in rates that has occurred will pose a problem.  He cites the higher rates in 2003-2005 and the sales volume as proof.  The STUPID FUCKING IDIOT!!!  2003-2005 also saw the Stated Income products and the Option ARMs that heavily influenced sales volume.  Those products no longer exist.  Existing sales compared to the increase in rates show the change and slow down.

9.   The higher interest rates also affect homeowner affordability. Higher rates and prices mean less affordability and less affordability, especially among the first time buyers who are already priced out of the market to due high Student Debt and low income.

10.   What about the Qualified Mortgage and its restrictions?  Lenders now have a fiduciary duty to a borrower to approve Ability to Repay the loan. If the borrower goes into default, they can sue for fees, all interest paid up to 3 years in length, attorney fees and damages. Lenders have no idea what the liability is and as a result, they are being very restrictive in lending. Furthermore, non QM loans will be subject to such scrutiny that most will not get done.

I could go on and on but you should probably realize by now the absurdity of what is being reported.  What we see here is Empirical Analysis only where “observations” are made in the existing sales and then excuses are made for the results. No real analysis of the data is made.  As a result, Empirical tells us nothing about what is really going on.

Fundamental Analysis is needed to improve upon the QA. FA requires in depth review of the different regions, looking at the various economic conditions, geographical conditions, demographics and other relevant factors that have an influence on sales.  Then Quantitative Analysis is done to determine what is really going on.

The NAR and others don’t engage in the FA and QA Analysis. That is because it is costly, time consuming to set up the models, require personnel knowledgeable in Applied Mathematics, Statistics, Lending, Demographic Analysis and a variety of other disciplines to evaluate the data and models.  More important, the results will more often than not, reveal the true underlying weakness in the positions that they regularly take about how the real estate market is improving.

What you do not hear are the people who are involved day to day in the real estate and lending industry and what they are reporting. Nor do you hear from the people who are truly evaluating the market, and who do not have a vested interest in reporting “good and improving” markets.  The true experts know that the whole “real estate recovery” is nothing but propaganda trying to keep a failing market from tumbling further.
35  Politics, Religion, Science, Culture and Humanities / Politics & Religion / New Case Law in CA on: August 08, 2013, 06:42:50 PM
Have you bought a foreclosure in CA? Do you think that you own the property?  Think again!  You may not.........

A case has been winding its way through the courts for several years. The case, Glaski v Bank of America, was contesting the legality of foreclosures in CA, based upon New York Trust Law, which cites that the loan must be assigned to the Trust prior to the closing date of the Trust, or it never made it into the Trust.  If it never made it into the Trust, then the Trust has no legal standing to foreclose.

"We conclude that a borrower may challenge the securitized trust's claim to ownership by alleging the attempts to transfer the deed of trust to the securitized trust (which was formed under New York law) occurred after the trust's closing date. Transfers that violate the terms of the trust instrument are void under New York law, and borrowers have standing to challenge void assignments of their loans even though they are not a party to, or a third party beneficiary of, the assignment agreement."[/b]]

CA courts are now split on this opinion and chaos is sure to reign until the 9th Circuit and eventually the US Supreme Court rules for or against.  In the meantime, over 50% of all foreclosures, past, present and future are now affected by this.  Here is what a mess it is.

The Investors have paid cash for the bonds, which was paid to the Depositor who organized the Trusts.  Per agreements, they would be the owners now, but that poses issues.

1.  Large numbers of Depositors are out of business.

2.  If the Depositor is in business, they have been paid for the loan, so they are trying to foreclose on a property that they no longer have any financial interest in having been paid. How do you foreclose on a loan that you have been paid on?

3.  All Servicing Agreements between the Servicers and the Trusts are now void, so Servicer actions are unlawful, and they have no ability to collect for the Trust. Assignments, Reconveyances, etc are void when executed by the servicer.

4.  One could argue that the Sponsor who sold to the Trusts were the new owners, but most are out of business.  Those left in business have been paid off as well.

5.  Next, you look to the Originator, but they have also either gone out of business, or have been paid off.

6.  If the Assignments are void, then half the foreclosures in CA are likely void.  The buyers of those properties are now in limbo.  They don't own the properties.  And the liens securing the loans are void, so the Notes are unsecured.

7.  Title companies are now completely at risk, providing title insurance on properties that are now clouded, and the companies may have to finally start paying out claims.

8. Foreclosure Homes Sales are now at risk.

I have been waiting for this type of ruling. I know how to defend against it, if given the opportunity.

36  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: August 07, 2013, 11:16:40 AM
I was in a meeting yesterday when this came out and the comments were not positive. Everything he said was contradictory or worse.

1.  He wants to replace Fannie and Freddie, but the legislation appears to support the creation of "smaller" entities that would act like the GSE's.  Guess who would likely run them.

2.  He wants to replace the GSE guarantees with a new Federal  Guarantee program, that would step into play after certain investor losses had occurred.  Just a "vague" notion with no flesh.

3.  He wants to keep rates low like right now for "affordable housing" for the poor to buy, and with  30 year mortgages. 

This is all smoke and mirrors.  Investors will  not purchase loans that have such low interest rates especially over 30 years with the high risk involved.  The losses would wip them out from defaults, even if higher inflation did not.

Also, the GSE's have bought their way to power through campaign donations.  They will continue to do so and will likely never disappear. 

There is no system in place to replace the GSEs.  Private investment which would have to supply the funds will not buy the loans without an ability to determine what they are buying.  This ability does not exist at this moment because the lenders haven't the ability to determine default risk, probability of default, loss given defaults or ongoing risk assessment on products at this time. And banks cannot portfolio lend because of these same reasons, and also because of BASEL III requirements.

That said, things begin to change on Aug 24.  (More to come on this.)

37  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: August 06, 2013, 01:53:08 PM
As I posted a response to the other site.

How can you trust a source that believes:

"At this pace, the Fed will soon accomplish their unstated goal of eliminating negative equity, which will allow for refinancing that will be great for the economy."

This is an absurd statement.  HARP already allows for Negative Equity financing, so who needs to artificially inflate values to eliminate negative equity again.   Inflating the values will only serve to prolong the housing crisis.

If you want to eliminate negative equity for refinancing, then you have to inflate to cover 25% of the homes with a mortgage.  This means another 10-20%.  But, that now means that you price buyers out of the market with the higher values.

This is a firm that does Real Estate Consulting?  Sounds like they are an off shoot of the NAR.

38  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: The Hillbillary Clintons long, sordid, and often criminal history on: July 30, 2013, 02:10:11 PM

You had to ruin your post by posting a photo of the old hag.  Turned my stomach.
39  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 30, 2013, 02:07:35 PM
Here we go again.  Richmond,  the Bay Area crime capital, murder capital per capita, haven for gangs and drug dealers, is now going to try Eminent Domain to take underwater properties and sell them back to the homeowners, after screwing the investors.

This is a scam being perpetrated by Mortgage Resolution Partners, former mortgage brokers who now have a group of investors.  They and Richmond are essentially putting together a program whereby they will "steal" the properties from legitimate investors, and then earn a substantial profit when they take the home for 80% lf LTV, and then write down the underwater part of the original mortgage to 95%.  Then the borrower refinances into a 95% ltv loan.

Outside of theft, here are the other aspects.

1.  No defaulted loans allowed.  The borrower must be current, and probably have good credit.

2.  With 95% loan to value, the borrower must have cash to close to keep the 95% ltv.  How many have the funds?

3.  The loans would most likely be run through FHA.  Most GSE products would probably decline the loans.

4.  It is the original investors in MBS who get screwed.  GSE loans will not be  touched.  Banks might also be on the target list.

5.  Mortgage Resolution Partners make all the money.

Of course, the mayor of Richmond is a former school teacher.  She has no clue about the law, and the consequences of such as action.  You want to ruin Private Lending in the future, then watch what happens if Richmond succeeds.


A City Invokes Seizure Laws to Save Homes

The power of eminent domain has traditionally worked against homeowners, who can be forced to sell their property to make way for a new highway or shopping mall. But now the working-class city of Richmond, Calif., hopes to use the same legal tool to help people stay right where they are.

An abandoned home in Richmond, where roughly half of all homeowners with mortgages are underwater, meaning they owe more than their home is currently worth.

Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures.

The results will be closely watched by both Wall Street banks, which have vigorously opposed the use of eminent domain to buy mortgages and reduce homeowner debt, and a host of cities across the country that are considering emulating Richmond.

The banks have warned that such a move will bring down a hail of lawsuits and all but halt mortgage lending in any city with the temerity to try it.

But local officials, frustrated at the lack of large-scale relief from the Obama administration, relatively free of the influence that Wall Street wields in Washington, and faced with fraying neighborhoods and a depleted middle class, are beginning to shrug off those threats.

“We’re not willing to back down on this,” said Gayle McLaughlin, the former schoolteacher who is serving her second term as Richmond’s mayor. “They can put forward as much pressure as they would like but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.”

Despite rising home prices in many parts of the country, including California, roughly half of all homeowners with mortgages in Richmond are underwater, meaning they owe more — in some cases three or four times as much more — than their home is currently worth. On Monday, the city sent a round of letters to the owners and servicers of the loans, offering to buy 626 underwater loans. In some cases, the homeowner is already behind on the payments. Others are considered to be at risk of default, mainly because home values have fallen so much that the homeowner has little incentive to keep paying.

Many cities, particularly those where minority residents were steered into predatory loans, face a situation similar to that in Richmond, which is largely black and Hispanic. About two dozen other local and state governments, including Newark, Seattle and a handful of cities in California, are looking at the eminent domain strategy, according to a count by Robert Hockett, a Cornell University law professor and one of the plan’s chief proponents. Irvington, N.J., passed a resolution supporting its use in July. North Las Vegas will consider an eminent domain proposal in August, and El Monte, Calif., is poised to act after hearing out the opposition this week.

But the cities face an uphill battle. Some have already backed off, and those that proceed will be challenged in court. After San Bernardino County dropped the idea earlier this year, a network of housing groups and unions began working to win community support and develop nonprofit alternatives to Mortgage Resolution Partners, the firm that is managing the Richmond program.

“Our local electeds can’t do this alone, they need the backup support from their constituents,” said Amy Schur, a campaign director for the national Home Defenders League. “That’s what’s been the game changer in this effort.”

Richmond is offering to buy both current and delinquent loans. To defend against the charge that irresponsible homeowners who used their homes as A.T.M.’s are being helped at the expense of investors, the first pool of 626 loans does not include any homes with large second mortgages, said Steven M. Gluckstern, the chairman of Mortgage Resolution Partners.

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000 in equity.

All of the loans in question are tied up in what are called private label securities, meaning they were bundled and sold to private investors. Such loans are generally the most unfavorable to borrowers and the most likely to default, Mr. Gluckstern said. But they are also the most difficult to modify because they are controlled by loan servicers and trustees for the investors, not the investors themselves. If Richmond’s purchase offer is declined, the city intends to use eminent domain to condemn and buy the loans.

The banks and the real estate industry have argued that such a move would be unprecedented and unconstitutional. But Mr. Hockett says that all types of property, not just land and buildings, are subject to eminent domain if the government can show it is needed to promote the public good, in this case fighting blight and keeping communities intact. Railroad stocks, private bus companies, sports teams and even some mortgages have been subject to eminent domain.

Opponents, including the Securities Industry and Financial Markets Association, the American Bankers Association, the National Association of Realtors and some big investors have mounted a concerted opposition campaign on multiple levels, including flying lobbyists to California city halls and pressuring Fannie Mae, Freddie Mac and the Federal Housing Administration to use their control of the mortgage industry to ban the practice.

Tim Cameron, the head of Sifma’s Asset Management Group, said any city using eminent domain would make borrowing more expensive for everyone in the community and divert profits from the investors who now own the loan to M.R.P. and the investors financing the new program. “Eminent domain is used for roads and schools and bridges that benefit an entire community, not something that cherry-picks who the winners are and who the losers are,” he said.

Representative John Campbell, Republican of California, has introduced a bill that would prohibit Fannie, Freddie and the F.H.A. from making, guaranteeing or insuring a mortgage in any community that has used eminent domain in this way. Eminent domain supporters say such limits would constitute a throwback to the illegal practice called redlining, when banks refused to lend in minority communities.

Opponents have also employed hardball tactics. In North Las Vegas, a mass mailer paid for by real estate brokers warned that M.R.P. had “hatched a plan to make millions of dollars by foreclosing on homeowners who are current on their payments.”

In a letter to the Justice Department, Lt. Gov. Gavin Newsom of California complained that the opposition was violating antitrust laws and that one unnamed hedge fund had threatened an investor in the project.

But not all mortgage investors oppose the plan. Some have long argued that writing down homeowner debt makes sense in many cases. “This is not the first choice, but it’s rapidly becoming the only choice on how to fix this mess,” said William Frey, an investor advocate.

Mr. Frey said that the big banks were terrified that if eminent domain strategies became widespread, they would engulf not only primary mortgages but some $450 billion in second liens and home equity loans that are on the banks’ balance sheets. “It has nothing to do with morality or anything like that, it has to do with second liens.”

Many of the communities considering eminent domain were targeted by lenders who steered minority families eligible for conventional mortgages into loans with higher interest rates and ballooning payments. Robert and Patricia Castillo bought a three-bedroom, one-bathroom home in Richmond because their son, who is severely autistic, would anger landlords with his destructive impulses. They paid $420,000 for a home that is now worth $125,000, Mr. Castillo, a mechanic, said.

They have watched as their daughter’s playmates on the block have, one by one, lost their homes. But they are reluctant to walk away from the house in part for the sake of their son.

“We’re in a bad situation,” Mr. Castillo, 44, said. “Not only me and my family, but the whole of Richmond.”

40  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 29, 2013, 06:59:13 PM
What can go wrong?  Try this!!! 

Notice how the NAR is trying to spin the news.  Especially the last paragraph.  The lack of investors will lead to higher prices?  What planet are they on?  It has been the investors who have caused prices to increase.  The whole article is about spin.


Rising interest rates constrain pending home sales

After reaching a six-year high, pending home sales fell in June.

The decline in pending home sales is attributed to rising mortgage interest rates, which are beginning to impact the housing market, the National Association of Realtors reports.

NAR’s Pending Home Sales Index edged down 0.4% to an index score of 110.9 in June, dropping from a downwardly revised 111.3 in May. From last year, the index is up 10.9%.

"Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June," said NAR chief economist Lawrence Yun.

He added, "The persistent lack of inventory also is contributing to lower contract signings."

On the upside, pending sales have been above year-ago levels for the past 26 months.

Nationwide Insurance chief economist David Berson told HousingWire that although mortgage rates tend to dampen housing demand, stronger job growth, rising numbers of households and increasing household wealth can offset rising interest rates.

"Despite an increase of about half a percentage point for mortgage rates in June, however, the index remains at a high level (other than in May, the index is at the highest level since the end of 2006)," Berson stated.

He added, "This suggests that reported home sales will remain strong for the next couple of months (especially when combined with the large jump in the Index in May)."

Meanwhile, not all pending sales contracts are closing.

The issue is that there are some homebuyers who sign contracts with strong lender commitment letters, but have floating mortgage interest rates.

"Those rates can be locked as late as 10 to 14 days before closing, so some homebuyers may change their mind if the rate rises too much, which apparently happened with some sales scheduled to close in June," Yun explained.

As a result, closed sales are expected to edge down in the months ahead, but will stay above year-ago levels, according to NAR's chief economist.

The PHSI in the Northeast remained unchanged at 87.2 in June but is 12.2% above year ago levels.

In the Midwest, the index slipped 1% to 114.3 in June and is 19.5% higher than in June 2012.

Pending home sales in the South fell 2.1% to an index score of 118.3 in June, up 9.5% from a year ago.

Meanwhile, the index for the West jumped 3.3% to 114.2 and is 4.4% above year ago levels.

Existing-home sales are expected to rise more than 8% for the remainder of the year.

Additionally, investor shortages will lead the median home price to rise by nearly 11% this year, NAR concluded.
41  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: July 25, 2013, 05:46:34 PM

Here is some info to show all how screwed up things are.  These are Default Percentages of Loans originated through the GSE's in 2008 and 2009.  By that time, underwriting had tightened considerably, but there were still high LTV loans being done.

With the data, you can see the impact that low credit scores had on Default Percentages, but there are contrary indications that don't make sense at first.  What I am doing is evaluating a 15m loan data base from Freddie to understand why the outliers exist, the causes of such, and how my new scoring model can account for those factors.  Additionally, I and others are engaged in taking this data, using it to determine default risk probability, and then use the data to identify Tier 1 & 2 Capital requirements for banks under BASEL III.  The bad part is that I am not getting paid for this yet.  That only occurs when we roll everything out next month, and then start signing up banks.  At that point, my Patents Rights and Royalties kick in.  But until then, I am eating beans, without the ham hocks.

                         GSE Loan Default Rates 2008-2009 Loan Originations

                                     Loan to Value 25% to 75%

   FICO                           350-639   640-679   680-719   720-950

   DTI         20.1-25    14.80%     5.20%   3.00%     0.50%
   DTI         25.1-30    16.70%     6.70%   3.50%     0.80%
   DTI         30.1-35      17.60%     7.80%   4.30%     1.00%
   DTI         35.1-40   19.90%     9.00%   5.60%     1.50%
   DTI         40.1-45   22.20%   11.20%   6.40%     1.80%
   DTI         45.1-50   23.00%   11.50%   7.20%   21.00%
With this data, notice the increase in Default % for the 720 bracket.  This is purely a result of the high DTI.  Probably, it also means that the loan amounts were lower than $200k and presents a small positive Cash Flow after living expenses are considered.

For the under 640 bracket, notice the consistent high default percentages.  Typical of that credit profile. 

This data shows the nexus of DTI to FICO, especially when loan amounts are smaller and not larger.

                                       Loan To Value  75.% - 85%
   FICO                           350-639    640-679   680-719   720-950

   DTI         20.1-25   17.50%   8.90%   5.40%   1.30%
   DTI         25.1-30   19.00%   9.30%   5.90%   1.60%
   DTI         30.1-35   22.20%   11.00%   7.20%   2.20%
   DTI         35.1-40   24.20%   13.20%   9.20%   3.20%
   DTI         40.1-45   27.10%   15.40%   10.90%   3.90%
   DTI         45.1-50   27.60%   16.50%   11.40%   4.60%

At the 75-85% LTV, Defaults have increased across all cohorts.  This is the stronger influence of the higher LTV at work.  This is in line with studies that indicate the higher the LTV, the greater the risk.  A likely reason in this case is that many of the homes dropped in value from origination, preventing an ability to "exit" the loan as finances got worse.  Positive cash flow would be an issue with the DTI above 40%, for many of the loans.

                                            Loan To Value 85.1% to 95%

   FICO                          350-639   640-679   680-719   720-950

   DTI        20.1-25    17.40%   7.80%   5.00%   2.10%
   DTI        25.1-30    19.40%   9.00%   5.50%   2.50%
   DTI        30.1-35    22.40%   10.70%   6.70%   3.10%
        DTI        35.1-40    25.00%   12.70%   9.40%   4.30%
   DTI        40.1-45    27.20%   15.00%   11.10%   5.80%
   DTI        45.1-50    28.20%   16.20%   12.10%   6.80%
This chart offers an interesting observation.  With it, defaults from 719 and lower have remained reasonably steady.  This suggests that that there might be a "Cap" at some level for increased default risk.  (Means I have more research to do to figure this out.  For the 720 and up group, we see that the influence of DTI is being felt more.  Also, with the higher LTV, the possibility of exiting the loan through refinance or selling the property may have diminished, leading to a higher default rate.

                                                  Loan to Value 95.1 +

   FICO                           350-639   640-679   680-719   720-950

   DTI         20.1-25   19.00%   6.80%   3.10%   1.30%
   DTI         25.1-30   21.00%   7.40%   3.50%   1.40%
        DTI         30.1-35   22.20%   8.50%   4.10%   1.70%
        DTI         35.1-40   25.10%   10.10%   5.00%   2.10%
   DTI         40.1-45   26.50%   11.60%   6.30%   2.80%
   DTI         45.1-50   26.20%   12.70%   6.80%   3.60%

The 95 plus LTV group has thrown me for a complete loss.  Default rates have fallen for the 640 and above credit scores.  Yet, they essentially remain the same for the 639 and lower scores.  From a risk viewpoint, we know that 95% plus LTVs have a much greater default rate than the 85-95 group, but this does not reflect that reality.

Different factors may come into play, from the volume of such loans being much lower, whether a purchase or cash out refinance, to even regional differences of where the homes are.  But without in depth analysis, who the hell knows. Or there could be one or more of 28 other factors that play a role in default risk.

Additionally, has HAMP played a part as well? Or the offering of Short Sales before a person went into default?

The good news is that the number of defaults have fallen in the 2010 and 2011 vintages, but they have one to two years less performance to evaluate.  Additionally, they were subjected to more stringent underwriting, than in 08 or 09.  But defaults are surely going to rise, especially when the Fed quits QE, and also when HAMP loans begin to experience interest rate increases in 2014. 

Understanding this data is critical for the banks.  Under BASEL III,  Loan Risk is a key factor in determining Capital  (iow, shareholder equity) requirements for liquidity and loss purposes.  Banks have to increase their Capital  from 6 to 8%, based upon risk calculations.  But the problem is quantifying risk, and that is what I am engaged in now.

42  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Scott Grannis and friends: on: July 24, 2013, 06:33:20 PM

I have been missing out on things here. Once I get wrapped up on some work I have been doing, I might have the time to play again.

What CD posted is part of an ongoing argument that Scott, Tom and I have been having regarding the Fed.  The arguments are based upon whether the Fed is creating money in the traditional sense or not, and whether the Fed is manipulating money supply in a manner that does not effect M2.  Then, it evolves to whether the "Housing Recovery" is being caused by the Fed easy money policies, whether it is sustainable, or even if it is a recovery at all. Finally, it goes to whether the stock market and  bond market are up because of Fed policies and easy money or not.

Of course, I take the opposite position of Scott in every way imaginable.  (Note: I will admit finally that the Fed is not "creating money" by the technical definition, but I will argue all day long that they are manipulating money supply.)

It has been a very frustrated and heated argument at times, and often extremely confusing. But that can be the fun of it.
43  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: May 01, 2013, 03:49:24 PM
Watt is going to do everything that he can to force Principal Reductions on GSE loans.  Of course, that means two things.

1.  Ginnie Mae bond holders (includes Fannie & Freddie) will suffer additional losses in income revenue from the reduced payments.

2.  Taxpayers will be bailing out the GSE's for further losses.

Additionally, he is going to push lower lending standards for people who can't qualify at established standards, which means that we will be back to the standards that led to the Housing Crisis.

How will the market ever recover with these idiots in charge?

44  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Rep Mel Watt to head FHFA on: May 01, 2013, 10:57:48 AM

Rep Mel Watt being named to run the FHFA and therefore the GSE's. Among other things:

1.  Took campaign donations from Fannie and Freddie

2.  Supports more mortgage lending for low income borrowers

3.  Supports more mortgage lending for blacks

4.  Supporter of Community Reinvestment Act

5.  Supporter of the GSE's

6.  Opposed restructuring of the GSE's in 2003

7.  Against making the Fed more "transparent" and more regulated

8.  In favor of principal reductions on underwater loans and borrowers in default

9.  Wants to keep the GSE's

And I thought Mark Zandi would  be bad.........................

Welcome to socialized housing............not that it doesn't exist now.


45  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Housing Recovery on: April 30, 2013, 12:03:29 PM
I'm baaaaaack!

To put housing into perspective, since I haven't had the time lately to do much of anything, here is a report that really talks about the Housing Recovery for what it is.  I normally do not agree with Lee Adler on many things, but here I do.

It’s A Housing “Recovery” In Orwellian Terms – Here’s The Reality

April 23, 2013

The Commerce Department  today reported really good March home sales  relative the the past 4 years of the housing depression. Media reports included only the seasonally adjusted annualized sales rate, which was 417,000 versus a consensus estimate of 415,000. PR flaks at the major financial infomercial outlets were breathless in their reports. Bloomberg proclaimed “A dearth of existing properties is encouraging builders to undertake new projects that will keep fueling the economy. Mortgage rates close to record lows, higher home values and rising household formation are helping lay the groundwork for increased buyer traffic in 2013.”

It’s mostly mindless bullshit as usual. The numbers were good relative only to the recent past, and with the tailwind of Benito Bernanke’s massive mortgage rate subsidy. Looking at the actual numbers from the Commerce Department surveys, not annualized and not seasonally adjusted, we get a better view of current reality.

New house sales rose by 7,000 units to 40,000 in March. This was better than last year’s March gain of 4,000 units to 34,000, and better than the March 2011 gain of 6,000 to 28,000. Sales are up 43% in two years. Wow.

But let’s put this in perspective. It’s still below the 48,000 units that were sold in March 2008 in the middle of the housing market crash, the 120,000 units a month during the bubble years, and the 80,000 units per month typical before that.

New house sales normally peak in April, so there may yet be another peak ahead, but the NAHB builder survey indexes for March and April suggest that sales have already peak. Builders reported lower sales and traffic from mid March to mid April. This may be as good as it gets in this cycle.

Even with the Fed’s massive mortgage rate subsidy, sales have not surpassed 40,0o0 units per month. That’s half or less than half the peak levels reached from 1997 to 2007.

But builders are supplying enough houses to meet demand. The talk of inventory shortage is overblown.  Demand is weak. New supply production is consistent with the level of demand.

The talk of inventory shortage is overblown.  Supply production is consistent with the level of demand.  The inventory of new homes relative to sales is below the bubble years, but at normal levels relative to those seen in 2003-2005.

Median reported new house sale prices have risen 20% since 2009. Effective sale prices may have risen even more than that as builders were giving large incentives, including extra amenities, or discounts not reflected in prices as late as last year. Effective sale prices at the 2009 lows were lower than reported prices. The discounts and incentives have ended or been reduced in many cases.

Meanwhile, the average sale price dropped back over the past year as the ratio of cheap to expensive houses sold rose

The so called recovery is mostly a recovery in prices. Thanks to the Fed mortgage subsidy, we have housing inflation, but not much recovery in housing activity relative to historical norms. The market has bounced back to around 50% of historically normal levels only with the help of the massive Fed subsidy. We have to wonder where the market would be without that, or rather what will happen when that subsidy is withdrawn.  Knowing that removing this subsidy could devastate the so called housing recovery, it seems unlikely that the Fed would only do so under extreme pressure from the market in the form of consumer price inflation.  The government has managed to keep those numbers suppressed.
46  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 31, 2013, 04:32:40 PM
If you look at Shiller from a year ago, he was much more optimistic about a Housing Recovery.  Then about 6 months ago, he decided that recovery to 2007 prices might take up to 50 years.

At least he can change his mind a bit.

Tom Lawler is another one.  After leaving Fannie Mae, he started a Real Estate Consulting business.  He is extremely optimistic about recovery.  Of course, he must be so he can sell his services.

I don't think that anyone other than those who are actually engaged in the mechanics of trying to create a stable lending environment, in conjunction with meeting Basel 3, and the restoration of Securitized Lending, understand what the actual difficulties present are.

Heck, I can barely get my head around the tiniest of basics on Basel 3.  You can't believe how simple they have to make explanations for me. Even then, I only get about 10%.
47  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 27, 2013, 08:08:41 PM
But Wesbury says otherwise, so who is to argue?

The idiot................
48  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 27, 2013, 06:20:25 PM

The article you posted can be verified through US Census Data that breaks down home ownership by Age Cohorts.  The data shows that there is not enough new potential Home Buyers coming up in the 19-24 age cohort, the 25-34 cohort, or the 35 to 44 cohort to stimulate housing purchases.  This is because only the 35 to 44 cohort actually engages in buying behavior, and they are already at average highs.  The lower cohorts haven't the income, and don't engage in the same buying behavior.

But, when I have pointed this out before elsewhere, I have been pooh-poohed...................

BTW, the GSE's have just announced a new Modification Program for their loans beginning in Jul 2013, and extending through Aug 2015.  They will be No Income Doc and No Hardship Letter Streamline Programs.  As long as you have made payments for 12 successive months on time, at any time in the past, but are now behind from 90 days up to 720 days, you are automatically eligible.  You must also have Mark to Market LTVs greater than 80%.  Principal Forbearance will be granted.

What does this mean?  Essentially, the GSE's will be stopping foreclosures for those who chose to accept it.  Just let us know and we will provide you the Interest Rate relief that you want, and forbearance relief as well.   And, if we deny you a modification if you are up to date, then just stop making payments and we will modify your loan.

This is about nothing more than pumping more money into the economy by reducing homeowner monthly payments in one manner or another.  Whether HARP, HAMP or the new program, the government is going to keep the economy going by reducing mortgage rates.

Now, here is something that I am wondering, but there are no answers to yet:

Since the GSE's are going to be "ended" (we hope) in about 5 - 7 years, is this designed to effective pump up the economy through the destruction of the GSE loans?  Is the private lending going to be left to pick up the pieces of the Real Estate Industry from there?  Or is this designed to ensure that the GSE's cannot stop their lending?

After the willful modification of these loans, essentially the GSE loans mean that this bulk of homeowners are out of the RE market, pretty much for life.  That accounts for perhaps 50% or more of the entire market, and 95% of all loans done in the past 5 years.

Now you see why I was so depressed yesterday.  It is plain b.s. what is being done.  And we are left to create the new lending industry for the future.

49  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 27, 2013, 11:52:22 AM
You are probably right about the quote.  My memory gets worse daily.  If only I could "delete" memories and information to free up space like on a hard drive.

Reading the articles written by various commentators and financial analysts is so frustrating.  They just look at the raw data, and make proclamations without any real understanding of what is going on in "backrooms" across the country.  There are very well intentioned and knowledgeable people who are trying to develop the systems and the processes to restore not just the housing market, but lending in general.  As well, they are engaged in creating the monitoring systems to evaluate risk across portfolios, and then determine true reserve requirements under various scenarios.  Stress testing is a large part.

One of the things that we often read is how lending requirements are so tight, and they must be loosened.  But they make no recommendations, and just assume it is easily done.  That is not the case.

To create "loosened" lending standards is not simply a matter of reducing FICO Scores, or allowing for higher Debt Ratios, etc.  Each loan must be looked at from its own unique perspective, taking into account a large number of different factors.  My process looks at over 40 different factors alone and then the endless combinations that will affect default risk. Even then, it will be revised frequently to take account of changing economic conditions.

To give an example of how difficult loosening lending restrictions will be, we simply look at Fannie, Freddie and FHA.  Right now, F&F have extremely high qualifying standards, but not to the extreme that the new Qualified Residential Mortgage is expected to impose.  F&F defaults are at a semi-reasonable rate.  FHA, which has looser standards, but is still greater than what was occurring during the Housing Boom, is running delinquency rates of about 17%, and default rates of 9%.  Eventually, we expect to see defaults up to 30% over a 5 year time for FHA.

Qualifying for each of the programs are based upon FICO, Loan to Value and Debt to Income Ratios.  These are loosely linked together. 

The problem with this approach is that like with FHA, far too many bad loans are being funded, but also far too many good loans are being denied because the borrowers do not meet certain standards. 

To loosen the qualifying standards means more than just reviewing FICO, Loan to Value and Debt to Income.  One must also consider actual debt loads, family size, loan size, residual income, loan purpose, borrower behavior, and many other factors not currently considered and factored into the decision. 

A person with a 780 credit score, debt to income of 41%, and loan to value of 80% might seem like a very qualified borrower. But, if we are looking at a first time buyer, new construction home, loan amount of $150k, 4 kids, payment shock and medical insurance costs,  then this borrower is almost certainly going to default on the loan at some point. It is inevitable. 

Yet, at the same time, you could have a borrower who wants a loan, 90% loan to value, cash out debt consolidation, 36% debt ratio, but has a FICO of 603, and may very well be a perfect candidate for a loan, especially if the loan amount was $500k, and no kids.  But change the parameters to 45% debt ratio and a loan amount of $150k, and there is a significantly increased risk of default.

These are the types of problems that are being addressed, and we must resolve to allow for loosened qualifying standards.  But even then, it does not end at that point. 

How are the loans going to effect Basel 3 requirements for risk?  Greater risk means greater reserve requirements.  And if economic factors change, like increased costs from Obamacare, how is that going to affect borrower default risk?  What about decreasing home values, based upon rising interest rates?  What about exit strategies for loans going into default?

Then, how does one identify loans going bad, before they do, and how to institute loss mitigation procedures before it is too late? 

Or, how does one create a good pool of mortgages for securitization, which needs to be done if there is going to be a wind down of F & F?

These are the types of questions being asked daily, and for which we are looking for answers.

50  Politics, Religion, Science, Culture and Humanities / Politics & Religion / Re: Housing/Mortgage/Real Estate on: March 26, 2013, 05:56:31 PM
Thought it was time to check in again, and see what was being posted.  I have been heavily involved in Expert Witness work for a couple of homeowners and also further development of the Loan Default Risk Score.

Yesterday, I was in a meeting with people who are working on the Compliance Systems for lenders for Basel 3 risk issues. We were discussing different things, and of course FHA came up, as well as many different things.  All present, even a former Fannie Mae Risk Expert, had the same view of FHA, "bury it".

The consensus of all was that the Housing Recovery is smoke and mirrors, especially in light of 50% of home sales now being cash offers.  It is a propped up market, with much to fear, especially if the Fed can effect a 2% Inflationary effect as they desire. If that happens, Interest Rates would go to 4%, and there goes any Housing Recovery by the wayside.

A key issue that we are working on is related to Risk Evaluation of Existing Loans.  Noting that not only are Living Expenses increasing, which drives up risk, but also with the costs that Obamacare will end up in reducing Disposable Income, we are trying to expand upon the Default Risk Model to reflect the added Default Probability Percentage that will certainly occur. A difficult task, but one that needs to be taken into consideration at the very least, it will go to the heart of Basel 3 needs.

The simple fact is that foreclosures are going to increase again, as Living Expenses rise, and as Obamacare and other regulatory costs increase. People cannot realistically meet needs now, for up to 50% of the population. How will they do it 5 years, or 10 years in the future?

The idiots in Washington, and in each State Capital, haven't got a clue what they are actually doing.  The added costs from the b.s. programs that they are putting together will only serve to hasten collapse further, across all demographic divisions and divides.  The strains that the Middle Class is feeling now is only going to increase, and at a certain point, is going  to completely break in the next few years.  Then, the Depression will seem like the Roaring 20's.

Sorry about the rambling thoughts, but it is very disheartening when you meet with people who have far greater understanding of the factors at play, than you do and they confirm your thoughts.  Then, when you try and develop programs to stave off or lessen collapse, the idiots in Washington and elsewhere find new ways to destroy things in the name of "good".

Over the past decade I have really come to appreciate Thomas Jefferson and his comments about the "Tree of Liberty" needing to be replenished with the blood of patriots from time to time.  And I can really accept his belief that this must be done every generation.

Time to have a glass of wine and prepare for tomorrow................Cheers!!!!!
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