Fannie and Freddie lift Ban

Freddie Mac and Fannie Mae lift ban

Freddie Mac and Fannie Mae have lifted the ban on the sale of foreclosed homes, frozen since the document handling fiasco that started nearly two months ago. Freddie Mac sent a memo to agents instructing them to “resume all normal sales activity” while Fannie Mae issued a memo telling agents to “proceed with scheduling and holding the closings” of foreclosed sales. Fannie Mae also instructed agents to coordinate with appropriate personnel “if a title issue arises with respect to the potential defect of an affidavit used in the underlying foreclosure.” Fannie and Freddie owned nearly 240,000 properties at the end of September, valued at nearly $24 billion. Analysts claim difficulty selling those homes could lead to higher carrying costs for the mortgage titans. Further delays also could prompt buyers that had been under contract to lower their asking prices or to walk away from deals altogether which could cause the mortgage giants to incur heavier losses.

In August, Fannie Mae told mortgage servicers that they would face fines if foreclosures became unreasonably prolonged in a bid to avoid costly delays. The Federal Housing Finance Agency (FHFA) worked with Fannie Mae to make the decision after a thorough examination of foreclosed properties which the mortgage company has acquired. “Our decision was motivated by several factors including the protection of buyers with title insurance, the negative impact lingering foreclosed properties has on neighborhoods and the cost burden that is placed on taxpayers when [bank-owned] sales are suspended,” a Fannie spokesperson said in a statement. Fannie Mae said it would resume sales for properties with loans that had been serviced by units of Ally Financial Inc., Bank of America Corp., PNC Financial Services Group Inc., J.P. Morgan Chase & Co., OneWest Bank, and Sovereign Bank.

Foreclosure Options

Mess scares off Homebuyers:

The ongoing controversy surrounding foreclosures is taking its toll as homebuyers refused to look at distressed properties in October, and foreclosure sales suffered from delays, according to the latest Campbell/Inside Mortgage Finance Monthly Survey. Both the share of home purchases involving distressed properties and average prices for foreclosed properties fell last month, the survey found. News reports that major servicers were pulling REOs off the market, including some already under contract, spooked would-be homebuyers. The monthly survey found that 14% of owner-occupant homebuyers and 6% of investors refused to view foreclosed properties in October. Homebuyer fear was worse for short-sale properties where 30% of owner-occupant buyers, and 20% of investors refused to view these homes.

Servicing problems disrupted both short sales and REO sales. Survey results show that 24% of closings scheduled for October were delayed or canceled due to issues with short sales, while 12% were delayed or canceled due to REO title issues. Although distressed properties have dominated home sales for much of 2010, recent foreclosure problems helped trigger a dip in their share of the market last month, according to the survey. In October, distressed properties accounted for 44.3% of transactions tracked in the latest survey — down from 47.5% in September. "It's clear that decreased homebuyer demand for distressed properties has resulted in lower prices," said Thomas Popik, research director for Campbell Surveys. "With the foreclosure 'fraud' issue still out there, buyers are skeptical to purchase a REO. Until the fraud mess gets cleared up, most of our clients are second guessing their interest in REO properties," reported a Florida real estate agent responding in the la
test survey.

Short Sale Options

Short Sale Resolution

The availability of raw land and other forms of undeveloped property are becoming extremely attractive as prices continue to plunge and returns on water, minerals, gas rights, agricultural products and other materials rise. While raw land or undeveloped property may not be the right fit for every real estate investor, it's a good idea to remain alert to the possibility. Use this quick checklist to evaluate a potential property:

1. Is the zoning approved for the desired use? While it is possible to petition for a zoning change, don't count on approval. Instead, search for properties that provide a safe bet especially when first starting out.

2. Are there any environmental limitations? The EPA is probably not an organization you are used to doing business with but that doesn't mean they can't impact your property values. Protected wetlands, pollution zones and even required "buffer zones" are just a few considerations to keep in mind.

3. Do deed restrictions limit use? In addition to use restrictions, it's a good idea to review deed restrictions and land use limits. Certain forms of business endeavors, pollution or other concerns may preclude the use of the land for a desired endeavor.

4. Are there ancillary or additional incentives? Some parcels may present especially attractive investments due to location, agricultural exemptions, tax credits or other desirable aspects. Mineral and water rights, the ability to lease to other concerns or the promise of future expansion can enhance or limit almost any listing.

5. Multi-use property appraisals? Finding a multi-use property is one way to maximize gains and minimize risk but it can also present a unique set of challenges when obtaining an appraisal. Comparables can be difficult to come by so it's essential to work with a reputable entity capable of seeing the 'big picture".

6. Do you have staying power? Investing in raw or undeveloped land can be costly so make sure you have the cash reserves and/or connections to make it work. Even for those who simply intend to flip the property...remember that it can take more time due to a smaller pool of potential investors. Have a contingency plan in place to avoid unpleasant surprises down the line.

7. Last but not least...start small and grow from there. Don't bite off more than you are able to chew especially the first few times out. If you find a deal that is beyond your expertise, use the same techniques covered in our shortsale investing seminars to work with a "bigger fish" that is able to provide the stability and experience needed to make the deal work.

See you at the top!

Foreclosure Filings Down

Foreclosures fall 9% :

According to a report released by RealtyTrac, Foreclosure filings of all kinds, including notices of default, notices of auctions and notices of auction sales, dropped 4.4% during October, but it's not because fewer people are losing their homes. Instead, the market is seeing a temporary stay from banks freezing foreclose auctions to review loan documents. The drop in repossessions came after increases in four of the six previous months, topped by an all-time high in September, when 102,000 people lost their homes. In October, 93,246 homes were repossessed.

Rick S., Senior Vice President of RealtyTrac, believes there could be a further drop-off in November, because the impact of the freeze was not fully reflected in the October report. While that may result in further declines in bank repossessions, Rick expects it to take many months before overall foreclosure rates really improve. There is still a very large backlog of borrowers who stopped paying their mortgages long ago but who have not yet been served with a single foreclosure filing and so are not being counted in RealtyTrac's statistics. "Today, servicers are waiting longer and longer to put people in foreclosure," said Rick. "It's not unusual for someone in default go six to nine months without receiving a notice of default."

BofA Fights Back

Yesterday Bank of America rebuffed claims by a lawyer for several big investors that it should buy back troubled mortgages because the loans were made improperly. A group of investors, including the Federal Reserve Bank of New York and Pimco are pressing Bank of America to buy back a portion of some $47 billion worth of mortgages. Bank of America argued that the effort would have the effect of speeding up the foreclosure process and force it to evict more homeowners. The investors’ claims have become a major worry on Wall Street as the foreclosure crisis has escalated. Bank of America said the problems stemmed from the economic downturn rather than any underlying problem with how the mortgages were sold to investors.

It called the investor claims “utterly baseless.” Signaling a much more aggressive legal stance, the bank also criticized the lawyer behind the effort, K. Patrick. It argued that a letter she wrote last month that was signed by clients was “written for an improper purpose, or in furtherance of an ulterior agenda.” Ms. Patrick did not immediately respond to calls seeking comment. “I don’t think we should be put in a position where we aren’t trying to help homeowners through this strife because people want us to foreclose faster,” said B. T. Moynihan, Bank of America’s chief executive. In addition, Mr. Moynihan said, he was caught off guard by the decision of the Federal Reserve and Freddie Mac, the government-controlled giant, as well as private investors to sign the letter.

The Cost of Falling

Fannie/Freddie will cost billions

Propping up Fannie Mae and Freddie Mac will cost taxpayers $154 billion under the most likely scenario for home prices, the mortgage giants' regulator said yesterday. But the bill could end up much greater—nearly double the $135 billion already spent—if grimmer projections prove true and the economy slides back into recession. The projections, based on the results of a home-price "stress test" by the Federal Housing Finance Agency, offered the first public estimates of the final cost of the government's rescue of the mortgage-finance firms, which is on track to become the most expensive legacy of the 2008 financial crisis. Under the regulator's most positive home-price scenario, Fannie and Freddie would lose $6 billion over the next three years and they would still have to ask the government for 11 times that amount to make dividend payments.

On its most likely projection—which assumes an end to the housing crisis is close and that home prices will stop falling soon—it will lose $19 billion in the same period. On the other hand, if the economy slides back into recession and home prices fall by another 20% to 25%, the companies could cost taxpayers an additional $124 billion, before dividend payments. Another drop in values could lead to more delinquent borrowers with fewer options to avoid foreclosure. Price declines could also lead to losses on the nearly 200,000 homes the firms have taken back through foreclosure. Fannie and Freddie own or guarantee around half of the nation's $10.6 trillion in mortgages. While the Obama administration has said the $700 billion Troubled Asset Relief Program could ultimately cost taxpayers a fraction of the initial investment, the tab for Fannie and Freddie has swelled as mortgage delinquencies have mounted. Federal policymakers have relied heavily on the firms to help,
stabilize the housing sector, which together with the FHA have backed or bought nine in ten new loans this year, according to Inside Mortgage Finance.

Commercial NOD mixed

Commercial delinquencies mixed

According to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report, delinquency rates were mixed in the second quarter for commercial/multifamily mortgage investor groups. The delinquency rate for loans held in commercial mortgage-backed securities (CMBS) is the highest since the series began in 1997. Delinquency rates for other groups remain below levels seen in the early 1990’s, some by large margins. Between the first quarter and second quarter 2010, the 30+ day delinquency rate on loans held in CMBS rose 1.39 percentage points to 8.22%. The 60+ day delinquency rate on loans held in life company portfolios decreased 0.02 percentage points to 0.29%.

The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.01%age points to 0.80%. The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.03 percentage points to 0.28%. The 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts remained unchanged at 4.26%. Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the second quarter were as follows:

• CMBS: 8.22% (30+ days delinquent or in REO);
• Life company portfolios: 0.29% (60+days delinquent);
• Fannie Mae: 0.80% (60 or more days delinquent)
• Freddie Mac: 0.28% (60 or more days delinquent);
• Banks and thrifts: 4.26% (90 or more days delinquent or in non-accrual).