Smalltownbanker

Delinquent Mortgages Equal to Three Times the Balanced For-Sale Inventory

Common sense tells me that a high percentage of those homes listed for sale have delinquent mortgages. There is also consideration that a percentage of mortgages are always delinquent but do not always end in default. There lots of assumptions in that chart and it results in figures that look much worse than reality.

Property Values Set to Fall 43% from Current Depressed Levels

By the way. The 43% figure is way too high and will not happen. Call that a predicition if you like...

Property Values Set to Fall 43% from Current Depressed Levels

Two invalid assumptions.
One is that Case Shiller's index accurately measures a market like the current market where such a high percentage of sales are foreclosure activity. Clue: It does not.
Two is that the second chart shows an increase in government lending acitivity. Lending funded by private securitization has virtually disappeared but the total lending has significantly declined also. Granted the percentages have shifted dramatically towards government backed programs but it would be interesting to see this correlated to a total lending volume by agency chart. I think the biggest shift you would find is the increase in FHA is coming from a decrease at Fannie / Freddie and not from the private securitization arena. Credit policy changes have eliminated the market that was served primarily by private securitizations.

FDIC, FHA, Fannie and Freddie Real Estate Exposure Killing Home Values in Georgia

As a Georgia Banker I can tell you that the failures noted here had nothing to do with the government. They are left to clean up the mess. Yes the values of the remaining homes suffer but FHA does not restrict the use of FHA financing to a certain percentage of the homes in a neighborhood. This development was built in the outer and more distant suburbs of Atlanta. The failures began to occur when gas prices crept over $3 per gallon the first time.

While Atlanta's growth has not been geographically restricted it has over the last few years changed based on commute costs. There are other factors but Hampton is just one example. All suburbs at this distance from Atlanta's center have suffered. I know because I worked for a bank that failed in one of those areas.

In the future we must be smarter about how we development, how we plan our land use, where we build our homes and certainly how we finance them. Each entitiy mentioned in your article may be a government agency but the Federal Agencies behind each do not communicate regarding collateral disposition and never will. They can scarcely keep up with their own inventory today.

You are searching for a solution that will never be found.

Were Fannie and Freddie the Real Enablers of the Housing Bubble?

Fannie and Freddie did not create the bubble, they were not the cause of the bubble, they were late to the party as this chart shows. In 2004 Fannie and Freddie began doing stated income loans and began to regain a piece of the market which they had lost to private securitization. I have been telling people for three years that they are scapegoats for Wall Street's non-agency securitization of garbage that accelerated into 2005. The entry of Fannie & Freddie into the stated income market created competition for the non-agency feeding frenzy and drove them to push subprime into higher and higher LTV products in order to feed the insatiable appetite for the over rated securities.

Taylor Bean: A Cautionary Tale for Ginnie Mae

I fail to see the point of this rehash of the work of others. You added nothing to it and made no noteworthy comment about it.

FHFA Consistently Understates Level of Housing Decline

It is also consistently ignored that Case Shiller excludes all foreclosure sales from its index of home prices. This may be a valid exclusion in normal times but foreclosures are a major price driver in the Real Estate market today and cannot be completely ignored when they are accounting for more than 40% of sales in some markets.

Neither of these measures has shown a trend towards an increase in homeprices. One month is an anomoly probably driven by the $100,000 decrease in the maximum Fannie & Freddie Loan which occured almost simultaneously with this uptick.

Fed Pushes Housing into Stronger Hands

Ban building? Which communist Nation are you guys from. If I own 20 acres and want to build a house on it why should you or some government agency have the right to tell me I cannot build. Get real. New housing starts that continue are in areas not impacted by the oversupply.

I am in an area that is overbuilt but new custome homes are still being built. I even have employees who are currently having homes built. Most new home starts are in markets not impacted by the oversupply.

The speculators that I see buying are buying with cash, most of which probably used to be in the stock market. They have taken that cash and feel that they can purchase good homes at great prices, hold them for a few years and make some money. Instead of decrying this practice you should be celebrating it as the makings of a potential bottom to prices. The foreclosure is not driving values down, the inventory is. If the inventory is purchased and becomes rental housing it will help to slow the fall of home prices.

I think your entire premise for this article is flawed.

Are Home Prices Still Too High?

You have made some good points here.

I originally anticipated that we might see an increase in rental rates with the current downturn but it appears that many of those losing homes to foreclosure are moving in with family and/or friends as opposed to renting a home or apartment. This has resulted in a drop in rents which contributes further to the decline in home values for the reasons you have stated above.

I agree with you that home prices are still inflated and do not see the market of 2004-2006 returning again. Due the to anticipated return of high oil prices I see exurban areas and rural areas surrounding Metropolitan areas will see limited returns to growth if any. People should and will seek housing that is close to employment and hopefully they will seek housing that falls within the traditional cost structure of 33% or less of gross monthly income, ideally this would be in the 25-28% range.

McMansions are and should be a thing of the past. Poor quality construction covered by fancy finishes dominated the 2000-2006 housing market and will plague it for the next 20+ years. New housing will need to be more functional, more energy efficient, built at a higher density per acre and it must be more affordable.

The following only prolong the pain:

- Foreclosure moratoriums
- Artificially lowered interest rates
- Tax Credits for buying a home
- Loan modification programs for people who bought something they
could not afford to begin with

The resolution of this crisis will come about through fundamental societal change in the way we live our lives because high oil prices will return within 24 months and as a result:

1) New homes need to be more energy efficient
2) Living space will be smaller per residential unit reversing the trend
we have seen over the last 3 decades
3) People will need to live closer to where they work
4) Homeownership by percentage will decline for the next decade and
possibly beyond
5) Good public transportation will attract new business and residents to
the Cities, Counties and States which commit the resources to it.
6) Zoning laws which currently force segregation of residential use from
commercial and retail uses will be abandoned in favor of more mixed
use development.
7) Society will benefit from these changes.

Why Are Mortgage Rates So High?

Amen!

Government Thinking Hard About 4.5% Mortgage Plan. Good!

You are too late. Mortgage rates are currently at 4.625% without this ridiculously ill conceived concept. Mortgage rates are not and have not been the problem with this mess. Lowering rates artificially for buyers does nothing to address the problems which are caused by existing non-performing loans.

We need the government to get out of the way and quit monkeying around with the process. Foreclose on the non-performing loans where the borrower cannot afford what he bought, let the servicers decide if it is worthwhile to modify a loan, and stop the states from offering these silly moratoriums which only make things worse and weaken the financial system further by sharply reducing incomes.

Should Fannie and Freddie Be Buying or Guaranteeing Investor Mortgages at All?

The reason for the reduction from 10 to 4 was not tied to poor performance of rental property owners. It was tied to the failure of real estate speculators in Florida, California, Arizona and Nevada primarily as well as a few other hot markets around the nation. The rate premiums Fannie & Freddie charge for funding investor loans have doubled in the last 9 months and the changes are hurting people who provide solutions in addition to hindering speculation.

As a mortgage lender the investors I work with who own multiple rental properties are now forced to seek loans with higher rates and balloon payments in 2-5 years making their investment much riskier. On one hand the government is working to decrease the potential risk of homebuyers but on the other hand their actions are increasing the risk on approximately 40% of the housing stock which is investor owned. There is no common sense in this equation.

Yes, Fannie and Freddie should continue to provide investor financing especially now since the percentages of owner occupied homes will continue to decline. The levels reached over the last few years were artificial anyway and will not return unless we return to lax underwriting and no down payment loans for people who do not pay their bills. At this point even FHA is considering offering special $100 down financing to investors who purchase HUD owned properties.

The Economics and Ethics of Mortgage Default

This is a sad commentary on what this nation has degenerated into. I am glad my father is not around to see this. I am disgusted by the continual discussions about walking away from your debts, your responsibilities and the suggestion that someone quit their job as a means to put pressure on a lender to lower the payment or principal balance. I am disgusted by a government that thinks it can fix deadbeats by lowering their payments.

I read this morning that 25% of the modified loans are delinquent after the first payment beyond modification and 50% are delinquent after mulitiple payments. Why bother? Anyone who would consider this approach to the mortgage note they signed has no right to ever own a home again. In fact I have just bought some new appliances and will happily donate the boxes for their new home under the local interstate highway overpass. I hear they have lots of bridges in California.

By the way, anytime the government offers you money, the collateral is your soul. It is hard much harder to walk away from that lien than it is to walk away from the mortgage.

Solve the Housing Crisis by Rewarding the Prudent

You are no different from the ones who want to reward those in default. Yes this could put cash back into the economy but the manpower to accomplish this would be enormous.
1. It would take several years to process the loans.
2. No one would want to participate because there is no profit to be made originating loans at below market prices.
3. The cost would be staggering.
4. The benefit would be extremely small in reality, my personal savings would be less than 1% in rate.
5. It would destroy the entire mortgage industry because they would be dragged into a longterm welfare mortgage program for 93% of the population which doesn't want or need it.
6. In the end the government would probably want a percentage ownership of your home, a percentage of the profits when you sell and your first born child.

Latest Mortgage Trends [Housing Tracker]

As a mortgage lender I can tell you that the quote of the day is completely false, at least in markets where a market value can be determined.

Some firms have completely stopped lending on Condos in Florida. Lenders have established very low benchmark credit scores (580) below which they will not lend. They are requiring a down payment. They are requiring documentation of income. They are, in short, going back to requiring applicants to prove they are qualified to handle homeownership. What a great idea.

An applicant with good credit, 3-5% down payment and verifiable income that supports the payment can buy a home (unless it is a condo in Florida) with a loan from any lender in the nation. Beazer and other builders were major contributors to our problems since they owned the mortgage company, contracted exclusively with the attorney's and title companies to handle settlement, and exerted extraordinary influence over the appraisers since the appraiser was hired by the lender who was owned by the builder.

We must strengthen RESPA, ban any kind of monetary agreements between builders, lenders, agents, appraisers, and settlement agents and enforce and reform TILA. We should require licensure of loan officers based on mandatory training and testing with continuing education requirements and hold employers 100% responsible for the actions ot their employees. This will force them to enact their own oversight procedures to identify and prevent fraud before the loan is made.

Housing prices will correct and level themselves at an appropriate level in communities as soon as the Government quits intervening and allows those who cannot afford their homes to be foreclosed on. The banks will sell their property as soon as they see fit. If they have the assets to hold them for a longer period of time that is a decision their Board and management will have to make. I work for a bank and we sell as quickly as we can get a viable buyer.