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Archive for April, 2011

Distressed Properties Claim 40% of Existing-Home Sales

Wednesday, April 20th, 2011

By: Carrie Bay

Distressed homes – typically REOs and short sales – accounted for 40 percent of the existing homes sold in March, the National Association of Realtors (NAR) reported Wednesday.

The trade group notes that these properties generally sell at discounts in the vicinity of 20 percent. Their large market share served to dampen the median existing-home price. For all housing types, it came in at $159,600 last month, down 5.9 percent from March 2010.

Overall, sales of previously owned homes rose 3.7 percent last month as the spring buying season began to take hold. NAR described March’s reading as “continuing an uneven recovery,” following the 9.6 drop recorded in February.

Lawrence Yun, NAR’s chief economist, expects the improving sales pattern to continue.

“Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage.”

“For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows,” Yun added.

The March numbers put the annual sales rate at 5.10 million in March, up from a revised 4.92 million in February, but below the 5.44 million pace in March 2010.

NAR notes that sales were at elevated levels from March through June of 2010 in response to the federal homebuyer tax credit. Immediately following its expiration, existing-home sales bottomed last July, and been on a slow but fairly steady path ever since.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun said.

He says given that the Federal Housing Administration (FHA) and Veterans Affairs (VA) government-backed loan programs turned a modest profit over to Treasury last year, and have never required a taxpayer bailout, low down payment loans should continue to be made available for consumers who have demonstrated financial responsibility.

A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent in February. They were 44 percent in March 2010.

All-cash sales were at a record market share of 35 percent last month, up from 33 percent in February and 27 percent in March 2010.

Investors accounted for 22 percent of sales activity in March, up from 19 percent both the month before and a year earlier.

FTC to Collect $2.2M from Banned Loan Mod Companies

Wednesday, April 13th, 2011

By: Heather Hill Cernoch

The Federal Trade Commission (FTC) reached a settlement this week with two companies and three individuals, who are now banned from the mortgage relief services business and must pay $2.2 million in assets for consumer refunds.

The FTC filed the proposed consent order in the U.S. District Court for the Southern District of Florida.

As part of its efforts to thwart scams targeting homeowners seeking mortgage relief, the FTC alleged in

November 2009 that Kirkland Young LLC and its manager, David Botton, misrepresented themselves as consumer mortgage lenders, servicers, or their affiliates.

According to the FTC, they falsely promised to modify consumers’ loans and make their mortgage payments more affordable. The FTC added Botton’s sister, April Botton Krawiecki, their father, Samy Botton, and Attorney Aid LLC as defendants in December 2009.

The settlement also permanently prohibits these companies and individuals from misleading consumers about financial-related goods and services and bars the defendants from selling or disclosing customers’ personal information.

The FTC did not allege any violations of the Mortgage Assistance Relief Services Rule in this case because the defendants’ claims predated the rule.

The rule bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable.

March home sales in Phoenix area the most in 66 months

Friday, April 8th, 2011

Phoenix Business Journal

Good news on the residential real estate front. The 9,933 Phoenix-area sales transactions that closed in March marks the most sales in 66 months, according to the Arizona Regional Multiple Listing Service Inc. monthly statistics report. It’s also the fifth highest sales month since 2001.

“Clearly buyers are taking advantage of the phenomenal affordability of Valley housing,” the report states.

The ARMLS Pending Price Index isn’t as sunny, however.

The median price is expected to be $113,000 in April as compared with $110,000 in March, but it’s expected to drop to $103,000 in May and then rise to $109,000 in June. The projections are based on pending sales transactions.

The average sales prices follow a similar pattern. The average sales price in March was $157,800. It’s expected to be $163,000 in April, $150,000 in May and $152,000 in June.

“While the declines in pricing signal good news for buyers who want to take advantage of the lowest pricing of the decade, they are unwelcome news for sellers who endure the ill effects on their equity,” the report states.

The news comes as separate Thursday figures from CoreLogic paint a gloomy picture for local home values

Read more: March home sales in Phoenix area the most in 66 months | Phoenix Business Journal

Bank Bailouts in the Black, Watchdog Asks “And the Toxic Mortgages?”

Friday, April 1st, 2011

By: Carrie Bay

The bailout programs used to prop up the nation’s banking system are now in the black. The U.S. Treasury announced this week that the investments it made in banks, beginning in 2008, to prevent the sector from folding under the weight of the financial crisis have now turned a profit.

Three more financial institutions repaid a combined total of $7.4 billion in Troubled Asset Relief Program (TARP) funds Wednesday. With these proceeds, taxpayers have now recovered $251 billion from TARP’s bank programs through repayments, dividends, interest payments, and other income.

That exceeds the original investment Treasury made through those programs ($245 billion) by nearly $6 billion.

“While our overriding objective with TARP was to break the back of the financial crisis and save American jobs, the fact that our investment in banks has also delivered a significant profit for taxpayers is a welcome development,” said Treasury Secretary Tim Geithner.

Treasury says the only outlay which it doesn’t expect to be recovered is funds disbursed for foreclosure prevention programs.

One of Treasury’s harshest critics, TARP Special Inspector General Neil Barofsky, cast his own dark cloud over the program’s proclaimed success, even as his final day in office approached.

Barofsky officially stepped down from his post Wednesday. In an op-ed piece in the New York Times Tuesday, he wrote that while TARP has pushed Wall Street to profitability

again, it has done little to honor the promises made to Main Street.

Barofsky reminded readers of the original intent of TARP, the intent that was put to lawmakers when they voted on the controversial $700 billion program – to buy up toxic mortgages.

“Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the [legislation] expressly directs the department to do just that,” Barofsky wrote.

But, “almost immediately,” Barofsky said, “Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.

“Treasury, however, provided the money to banks with no effective policy or effort to compel the extension of credit,” He said. “There were no strings attached: no requirement or even incentive to increase lending to homebuyers, and…not even a request that banks report how they used TARP funds.”

Barofsky continued, “Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals…may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises.”

Treasury officials say they believe the bank bailouts will ultimately provide a lifetime profit of approximately $20 billion to taxpayers. And with the profit reaped from the banks, TARP as a whole – including foreclosure programs, support for AIG, and the auto industry bailout – will result “in little or no cost to taxpayers,” Treasury said.

Critics of the program, though, aren’t putting much faith in Treasury’s claims. Rep. Patrick McHenry (R-North Carolina) is chairman of the House’s oversight subcommittee on TARP and bailouts.

He told the New York Times, “The estimates have been consistently off and Treasury has consistently changed the metric for success. In the beginning, they weren’t touting payback – they touted effectiveness. Now, they are touting payback but ignoring the moral hazard this program has created.”