Joe Adamaitis

New Thinking Needed to Rebuild the Housing Market

I will stand by my long time position that the banks and Wall St who had the most to gain during frenzy and who are directly implicated as the 'Creators' of such a market, need to now return some of those profits whether by reducing their own overhead, and or using some of the bailout funds. No one including myself wants to see one American paying for another American's poor decisions or their ignorance of how a bubble works, but it's time to make accurate assumptions of what can happen if credit remains tight, FHA goes under (a real possibility) and housing doesn't stabilize.

We're walking a dangerous path as unemployment continues (no matter that 521k jobs were better than expected) foreclosures will increase exponentially over the next 6 months, the dollar has signs of eroding faster than you can say Hugo Chavez, and the banks are unwilling to bite the bullet which will literally combine to drag this country down a second time for a long time.

Am I a bear hoping for this type of action to benefit my own positions, NO! I am a realist who is not a trained economist but can use common sense to connect the dots. I only wish the rest of this country could do the same or at the very least stop drinking the Kool-Aid long enough to understand that these are facts and not fiction.

I won’t go down the road of Barney frank and Chris Dodd as it relates to new regulations being imposed on the mortgage industry, but I would toss out one tiny kernel of info that if allowed to pass will stall the housing recovery even further adding to the issues I outlined above.

It is their intent to eliminate the YSP or Yield Spread Premiums which brokers and bankers alike rely on to be compensated. If this happens the consumer will be required to once again pick up the cost. Only this time it will be the borrowers who are already cash poor and who now need to fork over an additional one to two percent of the loan amount in order to obtain financing. If you think elimination of the YSP is a good way to punish all those bad apples who gouged borrowers, think again. It will not hurt them as they are gone and lenders have already imposed caps on what they can make. Allowing this regulation to be put in place will wreak tremendous havoc on borrowers and the entire housing industry. Toss in the millions whose credit is damaged and you can all but begin to watch the pool o available buyers shrink to a point that inventory will never be absorbed! Just a bit of food for thought!

Why Banks Prefer Foreclosures over Mortgage Modifications

As an FYI and to compliment your article:

Lenders Avoid Redoing Loans, Fed Concludes; Study Cites Lack of Profit in Aiding the Distressed

Boston Globe, By Jenifer B. McKim
July 7, 2009

Mortgage lenders don't try to rework most home loans held by borrowers facing foreclosure because it would probably mean losing money, a study released yesterday by the Federal Reserve Bank of Boston concludes.

The Boston Fed's findings suggest the Obama administration's major effort to solve the foreclosure crisis by giving the lending industry $75 billion to rewrite delinquent loans to more affordable levels is not likely to work.

One of the study's coauthors, Boston Fed senior economist Paul S. Willen, said the government would be better off giving the money directly to struggling borrowers to help them with their payments, rather than to lenders that are averse to working out the troubled loans.

"Loan modification is not profitable for lenders," Willen said. "If it were profitable, they would go out and hire staff."

US Representative Barney Frank, head of the House Financial Services Committee, said the study results may provide answers about why so few struggling homeowners have been able to get help.

Frank, a Newton Democrat, said he is holding a hearing Thursday on his proposal to provide government loans to homeowners who have lost their jobs and can't qualify for loan modifications and other help because they don't have income.

"The problem is worse than we thought," Frank said. "The failure to do these modifications means the whole situation stays bad longer."

The Fed's study found that only 3 percent of seriously delinquent borrowers - those more than 60 days behind - had their loans modified to lower monthly payments; about 5.5 percent received loan modifications that did not result in lower payments.

The study focused on 665,410 loans that were originated between 2005 and 2007 and subsequently became seriously delinquent. It also followed about 150,000 borrowers for six months after they received help, through the end of 2008.

The lenders may have compelling reasons not to find new borrowers to help, according to the study. For example, up to 45 percent of borrowers who did receive some kind of help on their loans ended up in arrears again, the study found. Conversely, about 30 percent of delinquent borrowers are able to fix their problems without help from their lenders.

"A lot of people you give assistance to would default either way or won't default either way," Willen said. "They are trying to maximize profits, and at this point maximizing profits does not mean modifying loans."

Officials from Hope Now, the private-sector alliance of mortgage servicers and investors, were unavailable for comment yesterday.

US Treasury officials declined to comment on the Fed study, but noted in a statement that more than 240,000 homeowners have received loan modifications this year under the president's program.

Moreover, federal regulators said the pace of loan modifications has been increasing steadily since last year.

Given the findings, Dean Baker, codirector of the Center for Economic and Policy Research in Washington, D.C., said Willen's suggestion to give money to borrowers rather than lenders makes sense.

The number of foreclosure proceedings increased to 844,389 during the first quarter of 2009, up 73 percent from the first quarter of 2008, according to the Office of the Comptroller of the Currency.

"You have more money going to the banks and the servicers than you do to the homeowners," he said. "It would make more sense to just give money to the borrowers."

The $75 billion Obama administration plan, announced in February, provides incentives to motivate companies that service mortgages to make loans more affordable, including $1,000 bonuses for each modified loan and an additional "pay for success" fee of $1,000 a year for three years if borrowers stay current on their new terms.

Willen said the success bonus could have the unintended effect of steering loan servicers away from those who need help the most, and toward only those borrowers most likely to recover on their own anyway. He said that if modifications increase, it won't be by much. "My guess is they are going to help people who are OK, and they are not going to help people who are deep trouble," he said.

Alan White, a professor at Valparaiso University School of Law in Indiana, said lenders could cut down on the number of borrowers who end up defaulting again by giving them more help in the first place. He said too many modified loans don't result in low enough payments. Also, he said, there may be fewer borrowers who can get out of trouble on their own because of continuing difficulties in the economy.

"The servicers are making assumptions that are much too anti- modification," White said. "The servicers have the authority" to help borrowers, "they just don't want to use it."
The study, coauthored by Manuel Adelino and Kristopher Gerardi, also rebuts a widely held suspicion that the holdup in modifying loans is because of investors who control them through mortgage- backed securities. The Fed found no difference in the rate of aid between investor-controlled loans and those that lenders own directly.

Real Estate: The Truth at the Heart of the Crisis

Fraud?????
It began at the very top of this chain. Analysts who projected unimaginable profits at all costs and who gave the thumbs up on garbage programs. Their bosses who went along and created subsidiaries to peddle the garbage and then their co-horts on Wall St. who continued the push to billions.

Le tus not forget the distribution channels set up by these same buffoons via wholesale and correspondent lending. Remember one thing, as a banker or broker, I do what I'm instructed to do in order to sell the paper.

If you tell me collect W-2's and paystubs that's what I collect. If you say I don't need documents just send me the app, that's what I do. I earn a living doing as I'm told by the people who are supposed to know what's going on. They were supposed to run the models and they did not!

All I'm saying is if you continue to blame the homeowners whether they were good bad or indifferent, greedy or naive, then we will never get out of this. As the news broke today in the Boston Globe, these same lenders are not helping people. They took 75 billion to go towards helping alleviate the foreclosure issue and they instead have hoarded the cash. The same guys who started this fiasco!

So the real question for anyone who wants to continue whinning about spending our tax dollars on irresponsible borrowers, is this:

You may not want your tax dollars going to to people who are now stuck, but who would you rather this money go to?

Those who will survive and help turn this economy around or those who already made billions the first time around and won't drop a dime to help you or this economy?


On Jul 07 09:36 AM davidma11 wrote:

> FRAUD. that is what is different. The average 'Joe" didn't have a
> problem committing fraud and banks didn't care because the sold their
> paper to foreigners. What is different is the average person feels
> no remorse for defaulting on their borrowering..
>
> I keep reading over and over on how the banks are mean because they
> won't write off 300K off of someones mortgage. Personal responsibility
> is gone and now we are spreading the pain to everyone else. Now I
> get to pay for someone elses mortgage and mine too.

New Affordable FHFA Loan Program Sounds Like Predatory Lending

Excellent article Ed!

Foreclosures Getting Out of Control

I sense a dose of reality here this morning. For those green shooters who latch onto any mirage of positive data, the truth must feel like daggers to the heart. (Sorry Larry)

If only we could focus on facts in this financial crisis and not spin the data, (as in, jobs fell 627k but it was less than analysts expected or shares of XYZ stock were up as they lost less than analysts expected: KEY Word ANALYSTS) perhaps then and only then can we truly assess the reality of what we're going through.

The most valid and important point I heard this morning (thanks Derryl) was that prices need to come down to align themselves with income levels. Accurately stated! Sellers and lenders continue to look for suckers to take them out of their misery and as long as this continues we will not hit the bottom. Further to this point is principal reduction by those who gained the most. And before everyone get's their shorts all bunched up over this comment, you need to truly get on board with where this entire mess originated from. The Top!

Billions made and now it's time to pay the piper. This isn't about bailing out foolish or greedy homebuyers. This isn't about giving people a free ride on the backs of taxpayers. This is punishing those who had the tools, the brains (we thought) and the sophistication to analyze the products, run the models in good times and bad, but went ahead and created and distributed this junk across the country. Now it's time to give back in order to stabilize not just the housing industry, but the worldwide economy!

I don’t care if you call it principal reduction or housing recovery action, keep the people in their homes and level the playing field against dropping prices. Get it over with and stop drip, drip, dripping the morphine! Until hard choices such as principal reduction and seller price reductions are made there is no way for us to get to this coveted issue of the bottom!

Plan Orange for Mortgages: Immolate the Crisis

Been saying it for a long itme. Glad to see someone really has it wired. Nice job!

PS It's better than suing all the lenders and cohorts who pretty much singelhandedly created the debacle. Who can really say they didn't ruin the industry?

Economic Numbers: Manufacturing Looking Better, Housing Stalls

With the jobs report this morning, you can call this a trifecta! Mark Zandi, see us going late into 2010-2011 with a slow recovery while others are calling for a recovery at end of this year. I have a hard problem taking any of these analysts serious with the data we see day in and day out and as well the drip, drip dripping of plans from Obama on housing.

No one in the admisitration seems to want to bite the bullet and provide the necesaary moves to get the economy squarely on track. Instead they continue to pump money into the financial arenas which seems content on taking and spending as they wish.

I know I can be a pain when I harp on this, but you cannot continue to feed the monster that wreaked the ills of destruction on this country. This is getting uglier by the day!

Options Arm Recasts: Hype or Not?

if you all have not just seen the new announcement from HUD, they are now refinancing up to 125% of all Fannie and Freddie loans, again leaving in-house serviced loans, i.e. Pay Options out!

Here is a just a portion:

HUD No. 09-103 Melanie Roussell [phone] hud.gov/news/

For Release Wednesday July 1, 2009

HUD SECRETARY DONOVAN ANNOUNCES EXPANDED ELIGIBILITY FOR MAKING HOME AFFORDABLE REFINANCING

Announces eligibility for borrowers up to 125% underwater in Las Vegas with Senate Majority Leader Harry Reid and Congresswoman Dina Titus

WASHINGTON - U.S. Housing and Urban Development Secretary Shaun Donovan today announced an expansion of the Obama Administration's Home Affordable Refinance Program to include participation by borrowers who are current but up to 125 percent underwater on their mortgage. Under authorization provided by the Federal Housing Finance Agency, borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will now be allowed to refinance those loans according to the terms of the Home Affordable Refinance program established earlier this year.
Secretary Donovan made the announcement while touring a neighborhood in Las Vegas with Senate Majority Leader Harry Reid (D-NV) and Congresswoman Dina Titus. Las Vegas leads the nation in foreclosures and approximately 67 percent of the current mortgage holders have mortgages that are higher than the worth of their homes.
"I am here in Las Vegas because it is ground zero of the foreclosure crisis," Secretary Donovan said. "I am pleased to join Senator Reid and Congresswoman Titus to make this announcement today, which I believe will make a critical difference in our ability to help many more Americans, particularly those here in Nevada, stay in their homes. The president's Making Home Affordable plan is already helping far more families than any previous foreclosure initiative and with today's announcement we will extend its reach still further."
"I am pleased Secretary Donovan accepted my invitation to come to Nevada and see firsthand the challenges homeowners here are facing," Senator Reid said. "His announcement that the loan-to-value requirement for the Administration's refinance program has been raised to 125 percent is good news for Nevadans fighting to stay in their homes. The neighborhood we visited today represents the hardships caused by the housing crisis and the
Information by State Print version
hope that is being restored through the neighborhood stabilization program and the Home Affordable refinance program."

Options Arm Recasts: Hype or Not?

Option Arms are and will continue to be a huge problem. I know for a fact that Wachovia (Wells) as well as CW have a boat load and have tried to modify but in most cases they fall well short of getting the job done. There appears to be no urgency on the banks part and further the neg am buildup which has many upside down remains a true hurdle to overcome for most.

Another big issue is that many of these same borrowers are sitting with second mortgages which again the large banks will not consider allowing a short sale unless they get every penny owed to them. Naturally, this is nearly impossible in most cases due to lost equity.

The borrowers are attempting to avoid foreclosure and deficiency liens by structuuring a sale to pay off both the first and second. Again, I know for a fact that this is not happening even when the short sale provides upwards of 90% in repayment of the first. Truly a roadblock to getting this industry back on its feet.

The last figure I have seen is that there is 1.7 billion in outstanding pay option arms. That's a lot of loans and a lot of downward pressure on prices in my humble opinion.

U.S. Banks Halt New Mortgage Lending

Each post was spot on here today. Dave's point is completely on target as I watch, hear, and read day in and day out the inactions of banks who are dragging each and every deal through the mud.

Whether it's a refinance, pruchase, loan modification or foreclosure, they have an insurmountable wall in front of each. Florida's Miami dade has 28,000 foreclosures on the dockets with many borrowers not even being contacted. This is a total meltdown being orchestrated by the folks who now have the cash and as we all know, those who hold th ecash hold the keys to all.

Another Mortgage Modification Proposal - Why?

Perhaps the old adage, 'One taketh and one giveth' could work it's way into this discussion.As I see it from my glass house inside a lending environment, I seem to remember that up until maybe five years ago, it was the lenders, Wall St, and a secondary market made up of hedge funds and private firms who chose which securities they would purchase or not.

I seem to remember a couple of guys named Frank and Bush who seemed to think everyone in America should have a shot at owning a home and I seem to remember that as a pawn in this game, we mortgage bankers and brokers who originated loans for a living were given our marching orders as what to sell, how to qualify people and how to process and underwrite the paper from the people above who were reaping huge profits along the way. Does this sound familair to anyone out there?

Does anyone remember a great old company named Greenpoint Mortgage? If you do, then you remember they used to have a unique program appropriately named "The True No Doc". The difference with the original Greenpoint program that was out there, is that you had others who went out and plagerized the program as they did to so many other programs NINA and Pay Option loans etc. This plagerization changed the original program which required 25% down to 0% down!!!

The True No Doc was just one of many programs that these brillant analysts who approved the programs to be securitized, rated etc., only saw one thing....$$$$$$$$$$$$$!!!

The people who directed this type of lending included the very same banks, Wall St Firms and others who as I have said many times reaped billions and continued to encourage new programs to make it easier for them to earn more. These are now the same people who are recieving billions to bail themselves out so who are we kidding?

Certianly borrowers should be blamed, but they are not in the mortgage or real estate business. they do not analyze new loan programs to put out onto the street. They do not recieve statistics on port-folio performances etc. Did they have enough information to make an informed decision, I say no!

Lenders made it easy and Realtors jumped into the fray helping to increase the prices. Everyone was on board and the consumer who again is not in this business simply went along for the ride. I say that we share the burden. YES, let the consumers stay and tell the banks to reduce the principal or whatever it takes to allow them to say. It's time to repay the American public for the raucous greed that spread from the top down. So as "they tooketh in the hay day, it's time they giveth back".

If you do not believe that these banks, lenders and Wall Streeters were really not the problem, then no one can help you. It always begins at the top and now we're all paying for it EXCEPT those being bailed out. Just my humble opinion!

The Sad Truth About Housing Data

While I understand your pain, you must grasp the severity of this issue. It is not a myth, it is not an illusion. You are not being informed as a consumer and therefore you will feel the pain in the end if you do not price accordingly. As I said earlier, I have witnessed first hand what can happent to sellers who are looking for that person who mysteriously has not done their homework and will take them off the hook.

As the car industry always said there's an ass for every seat, in this environment there is not a buyer for every home. Good luck my friend.


On Jun 03 02:45 PM User 425112 wrote:

> Everyday we hear a different housing story from different sources.
> i just need to have the property values up. I don't care about "what
> really is going on"

The Sad Truth About Housing Data

You may also want to factor that usual suspect in all this....interest rates.

Last week as we tried to unload our debt, rates shot up and have continued to move upwards. The spreads on the 10 yr and 2 yr signal a rally accoridng to the bulls while the same signals death to the housing market. We can look at and twist the data any which way we want, but as many saw last week, it was as if a light switch was turned off for new applications and deals.

As rates rise those bottom feeders scooping up the lowend junk, (which is really what all the pending sales are) will begin to re-evaluate the cost. Investors will not be able to make these deals work and we will see the end of any housing rally. Jobs, income, interest rates, affordability, and anything else you can think of are all components of housing which is why I feel no one can call this one way or another. You need at the very least, low rates, affordable homes and borrowers who now fit that large peg into the banks tiny round hole. It's a balancing act unlike no other I know which makes watching this whole thing so interesting.

The Sad Truth About Housing Data

Your comments seem in line with what is occurring versus what the talking heads continue to spin: "Housing is bottoming out!"

Truth be known, I see deal after deal, after deal come and go. Ninety nine percent of all transactions (excluding refinances) are short sales of bank owned properties. I can review my pipeline for the last twelve months and tell you unequivocally that nearly ninety five percent of those drop out!

That said, it appears to me that there is a grasping of any data that will help support the feeling of, 'we're out of the weeds' when in fact we're far from it! Should anyone be willing to speak the truth to a national audience seems to be a fleeting challenge.

"Pending Sales" is a great example of the newest data to be used to spin the positive. I would suggest that 'pending sales' be removed from all MLS's until a signed contract comes back from the bank versus allowing it to be listed with just the signature of the seller and buyer! Does anyone have a clue how many of these sit for months or in fact never ever get accepted as banks have their own idea of where the market is going. It makes one ask, just who are these people that manage bank owned REO? Do they have a clue? How do they explain that they had an offer of 100k more than what they eventually negotiated for and foreclosed on?

As well, let's consider the unemployment data and be truthful to the people about how bad this thing is about to get. I for one still believe we need prices to fall further and have watched in horror as sellers cling to their bottom line price and like the titanic watch any chance to sell go straight down the tubes!

Next I consider the incomes which along with 401k's and other investments have fallen dramatically. People north cannot sell to come south and people south can no longer afford those $300k plus homes that just nine years ago sold for $150k. Does anyone have a real idea of just how many homes are out there at $300k plus? How many have been pulled off the MLS hoping a recovery is about to happen or how many of them are in the ‘Foreclosure pipeline’ which again no one seems to have a real handle on?

Just once, with all the technology we possess, I wish we could state the truth across the board. From politicians, economists, and the real estate community we need a truthful analysis not what people want to hear. Instead of trying to prop prices up to cover those losses of sellers, submit to the fact that we need to see prices go lower and then we will hit bottom.

As well, let's consider the last piece of this disaster. In today’s NY Times, an Op-Ed piece from Peter Goodman today hit the nail on the head as he covered the governments program put in place by Obama to help those in trouble. He accurately showed that these programs are not doing the job they were created to.

Thousands of people who call daily are being turned away. The fact that the program (Home Affordability) could not even get the two agencies (Fannie and Freddie) to come up with a standardized program is ludicrous. Those with Freddie loans don't stand a chance as they cannot finance in all the closing costs and those with Fannie Mae loans sometimes find themselves being kicked out of the program due to a system glitch. Bottom-line, the refinance portion of this mess is not helping stabilize this housing market. It's throwing it into more turmoil and added to the issues above will not be the savoir everyone thought.

Yes, I know, I sound like a broken record. However, the truth is that we're a long ways away from the bottom and this euphoric message of recovery will again be another disappointment when the truth eventually takes hold. I suppose an argument can be made that as long as we keep the dialogue positive, it’s better than being negative. However, I prefer to lay it out there exactly the way it is. I hate seeing that buyer who’s been hoodwinked into putting twenty percent of their hard earned dollars down so that they can obtain the best rate, only to see it erode within the next six months as prices continue to fall. So for all you analysts who grasp at any data to support a recovery, try to keep it in the back of your mind as to how many people you will hurt should you be wrong. A recovery requires significant effort to stem the tide, and to date it appears we continue to throw billions away on ideas that have not turned anything around. A sad but truthful situation that continues to unfold in front of the world's eyes and yet no one, not even Barney Frank, Chris Dodd, Obama Timmy tax man can see the issues. It's more important to them to layer the industry with more and more regualtions that in the end is costing each and every person in this country.

A Christmas Present for U.S. Consumers in May

While I agree that some are enjoying the fruits of Obama's new 'Home Affordability Program' believe me when I say that the huge originaltions that everyone speaks of still need to close. Yes, we are originating loans (refinances) in record volumes, but we're only able to offer the program to a select few and those that are lucky enough to be submitted for processing and eventual closing still need the approval which is becoming more and more elusive. We need to see the actual number of those closed and also we need to consider the millions who are not eligible for any nuimber of reasons. Bottom,line as I see it, is we have a longggggg way to go. Today's paper in Sarasota FL spoke to the new wave of foreclosures filed in April due to the ending of Obama and agency moratoriams. This is just the beginning as lenders are revving up the foreclosure machines. A 40% increase in April is not what I consider reaching the bottom, yet watching the euphoric nature of the stock market one would never guess we still have a housing problem.

When Clinton ran it was the "Economy Stupid". Today it's "Housing Stupid". Without its revival all pieces fail. Add to it the jobs issue and as I said earlier, we have a longggggg way to. Just my two cents.