Though all the media attention this week is on the presidential and congressional elections, behind the scenes in Washington there are huge pressures building on Congressional Democrats and on the lame duck Bush administration to pull together a second economic stimulus package — quickly.
Excerpt from:
Washington Report: Pressure for Second Stimulus Package
Some investors may believe the headlines and assume that nobody’s lending money anymore — and certainly not for small residential rental projects.
Excerpt from:
Investor Report: Who is Lending?
McLEAN, VA — Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.7 point for the week ending October 30, 2008, up from last week when it averaged 6.04 percent. Last year at this time, the 30-year FRM averaged 6.26 percent.
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Bond Yields Drive Long-Term Mortgage Rates to Higher Levels
Home sales in Watertown, NY, have been slipping through the year, not unlike many areas across the country. With the number of home sales dropping, prices usually decline in turn. However, in this community that plays host to U.S. Army Base Fort Drum and its 10th Mountain Division, prices have continued to increase throughout the year, and have just slipped in the last month.
Read the original post:
Hot Market: Ft. Drum Area Runs Against Averages
Paramount in new federal regulations approved to foster more responsible mortgage lending, are the implications for consumers shopping for a home loan.
See the original post:
New Fed Rules Codify Mortgage Squeeze
Flooding along the upper Mississippi during the past few weeks has been awful. Dozens of levees have been breached, homes have been destroyed and millions of acres of farm land have been lost for the coming year.
View post:
The Fake Foreclosure Debate In Washington
Short sales are the most expensive aspect of any real estate transaction, due to the negotiations involved. It is extremely important to ask for more commission and reduce your time invested. It can easily be done by being more selective with the short sales you choose to work.
See original here:
How Top Producers Do Short Sales
According to Attorney General Michael B. Mukasey there’s no need for a federal task-force to unearth big-name mortgage fraud. That’s what he told the New York Times last week, and instead said that investigations were best handled by local prosecutors.
Read the original here:
Do We Need A Federal Mortgage Investigation?
Back in September 2007, US Senator Dodd from my home state of Connecticut submitted what appears to be hastily conceived legislation to solve the mortgage crisis in response to the prior month’s credit market meltdown. I believe it was created to address subprime lending, but because it was so loosely presented, it casts a wide blanket over the lending process to little effect and likely causes more problems because it embraces conventional wisdom rather than actual practices. As far as appraisals go, it clearly doesn’t recognize the fundamental problems that New York AG Cuomo has already recognized.
The appraisal related language in the bill is sloppy and contains slang, suggesting that someone with little experience drafted it or the the bill was not understood by the Senator. I am very disappointed. It found co-sponsors because it contains buzzwords like “appraiser”, “mortgage” and “meltdown”.
In fact, the language of the bill was so vague and misdirected (the appraisal part) that most appraisers never took it seriously, instead focusing on efforts by Senator Frank and NY AG Cuomo. However, it still has life and is being taken seriously.
The bill is now in the Banking, Housing and Urban Affairs Committee.
I think Senator Dodd’s introduction of the concept of bonding was to incentivize the appraiser to do good by having “skin in the game” but it does nothing to solve the current lending problem. Is this the best that can be done by Congress? It’s damaging to the lending industry and poorly written and thought out, and in my opinion, it allows Congress to say this takes care of the problem, when in fact, it makes it worse.
Here is the appraisal-related content summary provided by Senator Dodd’s web site.
V. Require good faith and fair dealing in appraisals.
- Prohibit pressure from being brought to bear on appraisers.
- Hold lenders liable for appraisals to avoid the appraisal problems created in the current climate.
Here’s the actual language of the appraisal related portion of the bill:
Title IV Good Faith and Fair Dealing In Appraisals
Requirements for Appraisers
My comment: Generic boilerplate that probably needs to be said. On that note I propose legislation that government officials never abuse their power, the public shouldn’t commit crimes and all school kids show do their homework. In other words, its an ideal, but it has nothing to do with addressing the core systemic problem - remove the possibility of collusion from the process.
My comment: They actually use the word “hit” in the legislation. Who wrote this? How is a lender prevented from attempting to “seek to influence an appraisers work.” These are just words.
Comment: “A crucial cause” implies appraisers initiated the problem. Wrong. They were the enabler of the lenders and the bad ones were rewarded for unethical practice. They actually use the word “meltdown” in this bill? This paragraph also infers that good appraisals are always low. You can say stuff like this all day long but that doesn’t stop it from happening.
Comment: “How do the costs of the bonding enter into this? I am not familiar with getting bonded I assume that means appraisers would file for a bond with a predetermined amount so we get enough coverage. That violates federal licensing law (USPAP). This does nothing to fix systemic fraud and burdens the appraisers that do the right thing with additional costs. How does it keep a bad appraiser from doing bad work? They charge the bond costs to their unwitting (or not) clients and it’s no skin off their back. Good grief.
– Lenders must adjust outstanding mortgages where appraisals exceeded
true market value by 10 percent or more.
Comment: Can you imagine the litigation costs that would result if this passes? Who determines whether the value is off by more than 10%? Another appraiser who is hired by the homeowner? An AMC? A real estate broker? Zillow? A lender using an Automated Valuation Model? What is “True” market value? Is this a new definition of market value and all other forms like “Fair” used by GAAP are “False”? I find it hard not to say the word “true” in this application without sounding sarcastic.
– When an appraisal exceeds market value by 10 percent (plus or minus
2 percent) or more, a borrower has a cause of action against the lender. A
consumer who is awarded remedies under this section shall collect from the
appraiser’s bond.
Comment: Can you imagine the the costs that will be endured by the consumer? I understand that bonding costs for the typical appraiser would be $10,000 to $40,000 per year (per appraiser). For what? Appraising is already a razor thin margin business. Two things are going to happen: appraisal services are going to probably double, and many good appraisers will be forced out of business.
– Actual and statutory damages up to $5,000.
Comment:The further destabilization of the lending industry is worth $5k?
Here are the Senators who think this is a good idea:
Sponsored by Christopher Dodd(D-Ct), with co-sponsors:
Sen. Daniel Akaka [D-HI]
Sen. Barbara Boxer [D-CA]
Sen. Sherrod Brown [D-OH]
Sen. Robert Casey [D-PA]
Sen. Hillary Clinton [D-NY]
Sen. Richard Durbin [D-IL]
Sen. Dianne Feinstein [D-CA]
Sen. Thomas Harkin [D-IA]
Sen. Edward Kennedy [D-MA]
Sen. John Kerry [D-MA]
Sen. Amy Klobuchar [D-MN]
Sen. Frank Lautenberg [D-NJ]
Sen. Claire McCaskill [D-MO]
Sen. Robert Menéndez [D-NJ]
Sen. Barbara Mikulski [D-MD]
Sen. Barack Obama [D-IL]
Sen. John Reed [D-RI]
Sen. Charles Schumer [D-NY]
Sen. Sheldon Whitehouse [D-RI]
I’ll bet if the situation was explained to the Senators with clarity, they would have issues with the bill as written. Time is of the essence, but the solution needs to solve the problem. The problem is about self-dealing and allaying investor’s concerns with the products they are purchasing.
Back in September 2007, US Senator Dodd from my home state of Connecticut submitted what appears to be hastily conceived legislation to solve the mortgage crisis in response to the prior month’s credit market meltdown. I believe it was created to address subprime lending, but because it was so loosely presented, it casts a wide blanket over the lending process to little effect and likely causes more problems because it embraces conventional wisdom rather than actual practices. As far as appraisals go, it clearly doesn’t recognize the fundamental problems that New York AG Cuomo has already recognized.
The appraisal related language in the bill is sloppy and contains slang, suggesting that someone with little experience drafted it or the the bill was not understood by the Senator. I am very disappointed. It found co-sponsors because it contains buzzwords like “appraiser”, “mortgage” and “meltdown”.
In fact, the language of the bill was so vague and misdirected (the appraisal part) that most appraisers never took it seriously, instead focusing on efforts by Senator Frank and NY AG Cuomo. However, it still has life and is being taken seriously.
The bill is now in the Banking, Housing and Urban Affairs Committee.
I think Senator Dodd’s introduction of the concept of bonding was to incentivize the appraiser to do good by having “skin in the game” but it does nothing to solve the current lending problem. Is this the best that can be done by Congress? It’s damaging to the lending industry and poorly written and thought out, and in my opinion, it allows Congress to say this takes care of the problem, when in fact, it makes it worse.
Here is the appraisal-related content summary provided by Senator Dodd’s web site.
V. Require good faith and fair dealing in appraisals.
- Prohibit pressure from being brought to bear on appraisers.
- Hold lenders liable for appraisals to avoid the appraisal problems created in the current climate.
Here’s the actual language of the appraisal related portion of the bill:
Title IV Good Faith and Fair Dealing In Appraisals
Requirements for Appraisers
My comment: Generic boilerplate that probably needs to be said. On that note I propose legislation that government officials never abuse their power, the public shouldn’t commit crimes and all school kids show do their homework. In other words, its an ideal, but it has nothing to do with addressing the core systemic problem - remove the possibility of collusion from the process.
My comment: They actually use the word “hit” in the legislation. Who wrote this? How is a lender prevented from attempting to “seek to influence an appraisers work.” These are just words.
Comment: “A crucial cause” implies appraisers initiated the problem. Wrong. They were the enabler of the lenders and the bad ones were rewarded for unethical practice. They actually use the word “meltdown” in this bill? This paragraph also infers that good appraisals are always low. You can say stuff like this all day long but that doesn’t stop it from happening.
Comment: “How do the costs of the bonding enter into this? I am not familiar with getting bonded I assume that means appraisers would file for a bond with a predetermined amount so we get enough coverage. That violates federal licensing law (USPAP). This does nothing to fix systemic fraud and burdens the appraisers that do the right thing with additional costs. How does it keep a bad appraiser from doing bad work? They charge the bond costs to their unwitting (or not) clients and it’s no skin off their back. Good grief.
– Lenders must adjust outstanding mortgages where appraisals exceeded
true market value by 10 percent or more.
Comment: Can you imagine the litigation costs that would result if this passes? Who determines whether the value is off by more than 10%? Another appraiser who is hired by the homeowner? An AMC? A real estate broker? Zillow? A lender using an Automated Valuation Model? What is “True” market value? Is this a new definition of market value and all other forms like “Fair” used by GAAP are “False”? I find it hard not to say the word “true” in this application without sounding sarcastic.
– When an appraisal exceeds market value by 10 percent (plus or minus
2 percent) or more, a borrower has a cause of action against the lender. A
consumer who is awarded remedies under this section shall collect from the
appraiser’s bond.
Comment: Can you imagine the the costs that will be endured by the consumer? I understand that bonding costs for the typical appraiser would be $10,000 to $40,000 per year (per appraiser). For what? Appraising is already a razor thin margin business. Two things are going to happen: appraisal services are going to probably double, and many good appraisers will be forced out of business.
– Actual and statutory damages up to $5,000.
Comment:The further destabilization of the lending industry is worth $5k?
Here are the Senators who think this is a good idea:
Sponsored by Christopher Dodd(D-Ct), with co-sponsors:
Sen. Daniel Akaka [D-HI]
Sen. Barbara Boxer [D-CA]
Sen. Sherrod Brown [D-OH]
Sen. Robert Casey [D-PA]
Sen. Hillary Clinton [D-NY]
Sen. Richard Durbin [D-IL]
Sen. Dianne Feinstein [D-CA]
Sen. Thomas Harkin [D-IA]
Sen. Edward Kennedy [D-MA]
Sen. John Kerry [D-MA]
Sen. Amy Klobuchar [D-MN]
Sen. Frank Lautenberg [D-NJ]
Sen. Claire McCaskill [D-MO]
Sen. Robert Menéndez [D-NJ]
Sen. Barbara Mikulski [D-MD]
Sen. Barack Obama [D-IL]
Sen. John Reed [D-RI]
Sen. Charles Schumer [D-NY]
Sen. Sheldon Whitehouse [D-RI]
I’ll bet if the situation was explained to the Senators with clarity, they would have issues with the bill as written. Time is of the essence, but the solution needs to solve the problem. The problem is about self-dealing and allaying investor’s concerns with the products they are purchasing.
Read the original post:
[The Homeownership Preservation and Protection Act] Dodd Bill Places A “Hit” On Good Appraisers, With Bondage
Like he did for the relationship between mortgage brokers and appraisers, the three major bond-rating firms reached an agreement with Cuomo, the New York Attorney General that creates more independence for ratings agencies. Cuomo has been one of the only public official currently in office that hasn’t simply tried to slap more regulations on all parties, pointing the finger and saying don’t do bad things.
Give me a break.
Like him or not, Cuomo has done is to fix systemic flaws within the financial system by following the mortgage.
Rating agencies were one of the weakest links in the integrity of the lending system.
Today’s WSJ article Bond-Rating Fee Overhaul Looms in Settlement, discusses the potential agreement.
many critics claim has been a chronic problem with bond ratings: They are paid for by the entities being rated. That financial dependence has been blamed for the industry’s failure to predict that risky subprime mortgages would crumble, resulting in losses and shaken confidence.
If the firm gave too low a rating, it wouldn’t get hired by the investment bank who would simply go to the next agency to get the rating they needed:
Under the Cuomo settlement, which would cover the hardest-hit portions of the mortgage market, the firms would get paid for their review, even if they didn’t end up getting hired to rate the deal. This would mean the firms would get paid even if they were tough. The plan, which requires final agreement by Mr. Cuomo’s office and the rating firms, wouldn’t dictate the exact fees rating firms could charge. But the firms would be required to charge more than a nominal fee for their preliminary work.
It still doesn’t fully separate the rating agencies for preferential treatment from bond issuers but it sure is a good start.
Cuomo seems to be less abrasive that Spitzer, his predecessor was. At the very least, the bond agencies were guilty of gross negligence for using the wrong data to understand the potential default rates for the securitization of subprime, alt-a and for that matter prime loans. Last summer they suddenly downgraded highly rated mortgage bonds claiming the models they had didn’t work.
Cuomo seems to be more interested in fixing investor confidence than playing hard ball with the agencies. It’s refreshing to think there is a light at the end of the securitization tunnel.
Speaking of stirring things up, take a look at these videos of the recent Parkersburg Iowa tornados: [bank security camera] [house] (hat tip to Market Power)
Read more here:
[Cuomo Recipe] Ratings Agencies Take Hand Out Of Cookie Jar
Remember the Department of Justice lawsuit against the National Association of Realtors’ Virtual Office Website policy? It was filed back in September 2005, and has been draggin’ on ever since.
Realty Viewpoint: DOJ, NAR Settle Virtual Office Policy Dispute
Pirates of several hundred years ago have been getting a lot of attention of late via the 3 Johnny Depp/Disney movies.
Well, apparently pirates formed some of the first petri dishes of modern economics and democracy according to a new book “The Invisible Hook: The Hidden Economics of Pirates” written by an economics professor at George Mason (hat tip to Freakonomics).
The book caught me eye, arrgh, as someone who fancies the likes of (sorry, I digress) Talk Like A Pirate Day each September 19th as well as my friend Chris Miles’ site TalkLikeAPirateDay.com. The “founders of International Talk Like a Pirate Day acknowledge that there is, in people who love to say “Aargh,” a yearning for a certain kind of freedom.”
Aargh!
Presidential candidates, take note: Long before they made their way into the workings of modern government, the democratic tenets we hold so dear were used to great effect on pirate ships. Checks and balances. Social insurance. Freedom of expression.
The pirates who roamed the seas in the late 17th and early 18th centuries developed a floating civilization that, in terms of political philosophy, was well ahead of its time. The notion of checks and balances, in which each branch of government limits the other’s power, emerged in England in the Glorious Revolution of 1688. But by the 1670s, and likely before, pirates were developing democratic charters, establishing balance of power on their ships, and developing a nascent form of worker’s compensation: A lost limb entitled one to payment from the booty, more or less depending on whether it was a right arm, a left arm, or a leg.
Aside from walking the plank analogies, what the heck does this have to do with housing?
I’m getting to that.
If you think about it, one of the arguments against anything in the form of a bailout, is that we let the free markets decide (aka “Aargh”). Good honest hard working people should not be asked to foot the bill for other’s greed. I agree.
But all the “help” done so far is explicitly presented as anything but a “bailout” which is not true. That’s because any “fix” is essentially a bailout.
In a pure sense, the “anti-bailout” sentiment is based on the idea that people took advantage of the lending system to their own personal gain at other’s expense so they should suffer their free market fate.
If people broke laws, they should be punished. But what if they didn’t and gamed the system to its full advantage because there were no regulations or significant repercussions?
My entry into blogging in 2005 was born out of frustration that people around me were gaming the system “legally” (definitely not ethically) and seemingly nothing could be done about it or no one in government was willing to or understood what the problem was. Until now.
Which brings me to my next point.
Free markets don’t work if there aren’t guidelines (remember that quote from Pirates of the Caribbean?). The problem with the lending environment of the past 5 years was the lack of approperiate regulation, oversight and enforcement. There was not a level playing field and risk could be shifted off to unwitting (misinformed, naive or stupid) investors.
In other words, it was a systemic problem.
Yet a business enterprise made up of the violent and lawless was clearly problematic: piracy required common action and mutual trust. And pirates couldn’t rely on a government to set the rules. Some think that “without government, where would we be?” Leeson says. “But what pirates really show is, no, it’s just common sense. You have an incentive to try to create rules to make society get along. And that’s just as important to pirates as it is to anybody else.”
Unless all parties have skin in the game, whether it is lenders, investors, borrowers, appraisers, mortgage brokers, mortgage bankers, investment banks, government, regulators, GSEs, ratings agencies, there is no financial democracy and we will have another systemic breakdown.
In other words, we need a workable regulatory structure.
The pirates were a lot more innovative than we probably give them credit for - you do need to lose an arm or a leg if you do something wrong.
Aye…
See original here:
[Bailing Out The Housing Ship] Pirate Economics And Democracy
Despite all the grim news about gas prices and recession, there are more than a few encouraging signs popping up in the national economy that aren’t getting a lot of attention.
Read the rest here:
Real Estate Outlook: Encouraging News
Make a payment a few days late on a HELOC today and the bank may term it out without your approval. You may have a very high credit score, never been late on a payment or pay above the minimum every month and still the bank may pull the HELOC. We are in a credit crunch, and that means some lenders are getting out of the lending business. Someone I know experienced this very same situation last week and they were in shock.
Across the U.S., sellers with good credit who have never been late on a mortgage payment are getting their home equity lines of credit (HELOCs) frozen or downgraded. Major lenders like Bank of America, Citibank, Countrywide Financial Corp., Washington Mutual Bank and USAA have announced that they’re cutting back HELOCs in areas where home prices have taken a hit.
The lower savings rate has been tolerable (or caused by) the ease at which homeowners could withdraw equity from their homes over the past decade. But we still feel guilty about not saving enough.
The ability to spend or feel comfortable with spending has been enabled by housing.
George Will, in his WaPo Alice in Housing Land piece provides perspective about this:
Although Earth’s temperature has risen and fallen through many millennia, the temperature was exactly right when, in the 1960s, Al Gore became interested in the subject. Are we to assume that last year, when housing prices were, say, 10 percent higher than they are now, they were exactly right? If so, why is that so? Because the market had set those prices, therefore they were where they belonged? But if the market was the proper arbiter of value then, why is it not the proper arbiter now? Whatever happened to the belief, way back in 2007, that there was a housing “bubble”?
and how little we now save.
Seventy percent of economic activity is personal consumption, which recently has been fueled by the “wealth effect” — people spending because they feel wealthier due to the appreciation of their largest asset, their house. So “stabilizing” — i.e., putting an artificial floor under — housing prices may be necessary to fuel consumption by a public that in the 1980s saved almost 10 cents of every dollar it earned, and in the 1990s saved a nickel, but recently has had a negative savings rate.
I suspect the savings rate will eventually rise, at great cost to the economy. He rightfully concludes:
Everyone knows that there is only one commodity the price of which always rises — major league pitchers. Concerning the market for them, Congress should do something.
Read more:
[Homeownership Guilt] Made Most Of Us Go To HELOC
