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What’s up With Fannie Mae? (Federal National Mortgage Corporation)

February 1st, 2013 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

I had the opportunity to hear former Presidents Bill Clinton and George W. Bush speak at the annual Five Star REO Conference in Texas late last summer. (REO is an acronym for Real Estate Owned which is what foreclosures and bank owned properties are technically called.) Both Presidents Bush and Clinton spoke about the importance of housing to our economy and to the American way of life. Clinton spoke in relatively more detail about the future of Fannie Mae. He indicated that while the exact future of Fannie Mae is by no means clear, the service that it provides to both lenders and the economy in providing liquidity to home mortgage lenders is crucial to maintaining a vibrant and relatively free housing market in the United States.

In the last several years there has been much criticism of Fannie Mae, (and its sister company Freddie Mac),  for having provided too much liquidity to lenders – under pressure from Congress – and the liability it has created for the United States Government. There can be little question that Fannie Mae worked as planned and backed the entire United States housing market, and as bad as things have been the last several years in housing, the situation would have been much worse had Fannie Mae not existed.

In the fall of 2008 the United States Treasury placed both Fannie Mae and Freddie Mac under conservatorship and liquidated the Preferred Stockholder’s equity position. The majority of Preferred Stockholders were banks and pension funds, thus spreading the damage. Common stock in both Fannie Mae and Freddie Mac remained listed and traded on the New York Stock Exchange until mid 2010 when the stocks were delisted. Both stocks continue to be traded over the counter but have lost substantial value. Conservatorship does not mean the Treasury owns Fannie Mae or Freddie Mac, ownership is still vested in the common stock shareholders, however conservatorship does mean that the common stock shareholders have lost all control over the operations of these institutions; a situation that will remain until such time as the conservator, the United States Treasury, determines the best course of action to take with these institutions. At this time the ultimate status of Fannie Mae is indeterminate. Congress has considered a number of actions to take but has not reached any agreement and has no legislation pending to resolve Fannie Mae or Freddie Mac’s future. Fannie Mae and Freddie Mac remain ill-liquid and under government conservatorship at this time, bankruptcy, revocation of charter and or break-up into smaller entities have all been considered.

 

By Dick Thackston CRB, ABR, ABRM,BrokerNH, MA & VT

About Fannie Mae

Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity, stability and affordability to the U.S.housing and mortgage markets.

Fannie Mae operates in the U.S.secondary mortgage market. Rather than making home loans directly to consumers, we work with mortgage bankers, brokers and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates. We fund our mortgage investments primarily by issuing debt securities in the domestic and international capital markets.

Fannie Mae was established as a federal agency in 1938, and was chartered by Congress in 1968 as a private shareholder-owned company. On September 6, 2008, Director James Lockhart of the Federal Housing Finance Agency (FHFA) appointed FHFA as conservator of Fannie Mae. In September 2008, we also entered into an agreement with the U.S. Department of Treasury that was most recently amended in December 2009. Under the agreement, Treasury will provide us with capital as needed to correct any net worth deficiencies that we record in any quarter through 2012. The agreement is intended to ensure that we are able to continue providing liquidity and stability to the housing and mortgage markets.

Fannie Mae has three lines of business – Single-Family, Multifamily and Capital Markets – that provide services and products to lenders and a broad range of housing partners. Together, these businesses contribute to the company’s chartered mission to increase the amount of funds available in order to make homeownership and rental housing more available and affordable.

 

Early History
The FHA Administrator chartered Fannie Mae on February 10, 1938. The impetus for creation of Fannie Mae was twofold: the national commitment to housing and the inability or unwillingness of private lenders to ensure a reliable supply of mortgage credit throughout the country. The primary purpose of Fannie Mae was to purchase, hold, or sell FHA-insured mortgage loans that had been originated by private lenders. After World War II, Fannie Mae’s authority was expanded to include VA-guaranteed home mortgages.

1954 Charter Act
The Charter Act of 1954 provided the basic framework under which Fannie Mae operates today but did not remove it from direct federal control. The act removed government backing for borrowings used to fund Fannie Mae’s secondary market operations. It stipulated that Fannie Mae be exempt from all local taxes except property taxes, and provided for the Federal Reserve Banks to perform various services for Fannie Mae. The 1954 Charter Act also defined the path by which Fannie Mae’s secondary market operations would be transferred to the private sector: proceeds from gradual sales of common stock were to be used to retire Treasury-owned preferred stock in Fannie Mae.

1968 Charter Act
The 1968 Charter Act split Fannie Mae into two parts: Ginnie Mae and a reconstituted Fannie Mae. Ginnie Mae would continue as a federal agency and be responsible for the then-existing special assistance programs, and Fannie Mae would be transformed into a “government-sponsored private corporation” responsible for the self-supporting secondary market operations. The reconstituted Fannie Mae was to be stockholder-owned and managed. Fannie Mae retired the last of its government stock on September 30, 1968, and transformation to a government-sponsored private corporation was completed in 1970.

The 1968 Act provided the authority to issue Mortgage-Backed Securities (MBS).

The Act also established a regulatory structure to ensure Fannie Mae’s adherence to its public purpose. It provided for continuing HUD oversight of Fannie Mae, granting “general regulatory power … to insure that the purposes of this Title are accomplished.”

Emergency Home Finance Act of 1970
The Emergency Home Finance Act of 1970 created Freddie Mac and authorized it to create a secondary market for conventional mortgages. Parallel authority and limitations to deal in conventional mortgages were given to Fannie Mae.

To alleviate credit concerns raised by acquisition of conventional mortgages (that lack federal backing), several eligibility restrictions and/or risk sharing requirements were imposed on the mortgages Fannie Mae could buy.

The new law also required the HUD Secretary to provide prior approval of Fannie Mae’s “purchase” or “dealing in” conventional mortgages (later interpreted by HUD regulations in 1995 to require specific approval of new and different conventional “programs”).

Secondary Mortgage Market Enhancement Act of 1984
The Secondary Mortgage Market Enhancement Act of 1984 (“SMMEA”) clarified and modified several of HUD’s regulatory powers over Fannie Mae. It required HUD to respond within 45 days to any request for new program approval made by Fannie Mae under the Charter Act (with a 15-day extension permitted) and authorized Fannie Mae to purchase and deal in subordinate lien mortgages.

Financial Institutions Reform, Recovery, and Enforcement Act of 1989
The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) of 1989 made regulation of Fannie Mae and Freddie Mac consistent. Until 1989, Freddie Mac was owned by the Federal Home Loan Bank System and its member thrifts and governed by the Federal Home Loan Bank Board (later reorganized into the Office of Thrift Supervision). FIRREA severed Freddie Mac’s ties to the Federal Home Loan Bank System, created an 18-member board of directors to run Freddie Mac, and subjected it to HUD oversight.

Also, the GAO and Treasury were instructed to conduct studies of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. These studies laid the foundation for comprehensive regulatory modernization for both Fannie Mae and Freddie Mac in 1992.

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992
The Federal Housing Enterprises Financial Safety and Soundness Act (“FHEFSSA”) of 1992 modernized the regulatory oversight of Fannie Mae and Freddie Mac. It created the Office of Federal Housing Enterprise Oversight (“OFHEO”) as a new regulatory office within HUD with the responsibility to “ensure that Fannie Mae and Freddie Mac are adequately capitalized and operating safely.” OFHEO is funded by assessments on Fannie Mae and Freddie Mac and is authorized to act without HUD oversight on a range of regulatory issues enumerated in the statute. FHEFSSA established risk-based and minimum capital standards for Fannie Mae and Freddie Mac. And, it established HUD-imposed housing goals for financing of affordable housing and housing in central cities and other rural and underserved areas.

The Housing and Economic Recovery Act of 2008
The Housing and Economic Recovery Act of 2008 (‘HERA’) strengthened governmental oversight of Fannie Mae and Freddie Mac. It established the Federal Housing Finance Agency (FHFA), which replaced OFHEO and HUD as Fannie Mae’s safety and soundness and mission regulator. Among other things, FHFA has broad authority to require Fannie Mae to hold capital above statutory minimum levels, regulate the size and content of our portfolio, and approve new mortgage products.

 

http://www.fanniemae.com/about/index.html

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Will Technology Make the Real Estate Recovery Different from Past Recoveries?

November 26th, 2012 | Posted by Dick Thackston in New Real Estate | News | Real Estate News - (0 Comments)

 

First off, let’s be clear about this so called recovery every talking head in the media keeps talking about – it’s not your parents or grandparents recovery. It might be your great-grandparents recovery though! No economic downturn has had such a damaging effect on American Home ownership since the 1930’s and that effect is not going to go away anytime soon. This has been different from the 1930’s in that in the 1930’s destruction of housing values was pretty much across the board from Rich to Poor; in the current event the damage was primarily at the bottom and middle with homes over $750,000 – $1,000,000 range actually increasing in price during the period of this downturn. Since the end of World War II housing downturns have been generally short lived, in the eighteen to twenty four month range, and primarily inventory adjustment events in this case which began in the third quarter of 2005, the downturn has been primarily a loss of confidence – a much harder basis to recover from in all cases.

Technology is likely to have a significant impact on the structure of the real estate industry in the coming recovery for a number of reasons. Real estate transactions have basically two related and separate parts: the seller side and the buyer side.

The Buyer Side will not be as greatly impacted by change as the seller side due to some factors which are basic to the process. The impact of technology on the buyer’s side will primarily be on the media not on agents and buyers. Most people who have been involved with the real estate industry over the last ten or fifteen years have known that print advertising has declined in efficacy dramatically. Virtually all buyers begin and continue their home searches on line. Brokers and real estate franchises that have been tracking the source of their business for many years have seen that buyer leads that came primarily from print advertising before the internet have seen the number of viable leads from print advertising drop to a very small number of viable buyer leads. The last and most effective use of print advertising has become open house events or very short term immediate demand sort of inventory like rentals. Buyers still however require the assistance of a licensed real estate agent to help them work their way through a real estate transaction and access and view properties as well as negotiate and consummate a real estate transaction. Fees for trained and competent Buyers Agents are likely to remain in the 2.5% to 3.5% of the transaction price that they have been in for many years due to the high time consumption and relatively high failure rate that Buyer Sides of transactions experience.

The Seller’s Side of real estate is likely to see the greatest changes. For a decade or more before the Great Recession large banks had been trying to repeal laws that barred them from providing real estate services such as listing and selling homes for their customers. Now as a result of the unprecedented number of foreclosures in the hands of banks they have become The Dominant Sellers of real estate in the United States. Fannie Mae and Freddie Mac established 6% as the official normal commission that they would accept on both short sales and foreclosures and required that commissions be spit equally between buyer’s side and seller’s side in a real estate transaction. Every real estate agent in the United States has been trained that establishment of “Normal” or “Set Fees” has an anti Trust violation since the late 1970’s, however the big banks and Fannie Mae and Freddie Mac have been seen as exempt from these laws. This has resulted in a situation where the majority of listings that sell are listed by Bank/Lenders that own them at a nominal rate of 6% with local real estate agents and agencies but using a conduit of third party companies, that collect hefty referral fees on their listings, leave the selling agencies to work with 1.5% to 2% of the actual sales price rather than the 3% to 4% that they have historically have had to work with since the end of World War II. These agents and agencies have been able to do this because of the downward changes in their cost structure do to the changes in technology.

It is unlikely that as non-institutional home sellers are able to re-enter the home selling market as prices stabilize, and even rise in the foreseeable future, that the advantage to both consumers and Realtors of lower fees on the listings side of real estate transactions will be lost, which have been made possible by the reduced operating costs possible for Realtors due to the changes in technology.

 

By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT

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The Elections Over! So now what for housing?

November 13th, 2012 | Posted by Dick Thackston in New Real Estate | News | Real Estate News - (0 Comments)

After what feels like an election cycle that has lasted forever (over eighteen months in New Hampshire) perhaps we can get on with the business of running our lives and business in a stable environment. While I’m not a great fan on what has happened over the last four years in Washington, at least we know where we are and given no great new changes in the economy or in Washington and there are some realities that are pretty apparent.

Clearly, housing has bottomed and there are signs of a kind of stability in residential housing. The majority of sales are Bank/lender owned properties; a record number of which are selling for cash. My own experience is that about thirty percent of sales are cash. I have spoken with other REALTORS in our area a few have reported cash sales as high as forty percent and a few have reported cash sales of around twenty-five percent, but all are in agreement the cash sales represent a huge chunk of the residential business at  this time. The drivers here are the truly low interest rates that savers can earn on any cash reserves they may have, the difficulty in obtaining financing generally and the difficulty in obtaining financing specifically on bank/lender owned properties due to the generally poor condition of these properties. The Federal Reserves continued commitment to keeping interest rates low into 2014 means this is likely to remain a major part of real estate sales into the future.

The end of the loan modification programs from Fannie Mae and Freddie Mac means that the message is clear to borrowers: if you want to keep your house you must pay the mortgage. These programs were almost criminally maladministered and sent mixed messages to home owners. Many homeowners stopped making their mortgage payments so that they could take advantage of these programs and actually ended up loosing their homes. The disappearance of these programs is likely to stabilize the housing market more than any other single event. More stable housing market = fewer foreclosures = better prices = housing recovery, although it will still take years to work through the backlog of homes in various stages of foreclosure.

The current administration remaining in office in Washington is also probably good news for housing and the average home buyer. It is more likely that the current administration will act to support the concept of a secondary market for home mortgages through Fannie Mae and Freddie Mac. Proposals put out by some of the more conservative supporters of the Republicans in the last election cycle to dismantle Fannie Mae and Freddie Mac and to have required huge down payments would have been a greater drag on housing and the economy than any of the various proposed limitations on interest deductions on home mortgages. Any thing that eases housing lending will be good for a recovery in housing.

Banks/lenders have been far more proactive about foreclosing on properties in recent weeks and months. They have been quicker to act on delinquencies and been quicker to act in putting properties on the market than at anytime in the last five years.

The primary focus in housing sales for the foreseeable year or more is likely to be bank/lender owned properties. Until a significant share of the foreclosure back log is burned up through new sales, foreclosures will be the driving force in house prices leaving little or no room for price increases through this and most regions of the country with first timers and investors being the primary source of buyers.

 

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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What do Banks Expect from Agents that Handle REO Properties?

August 17th, 2012 | Posted by Dick Thackston in Uncategorized - (0 Comments)

What is an REO? REO stands for “real estate owned” – it is a class of property owned by a lender. Most consumers don’t realize it but lenders that have REO Properties have very strict guidelines for the agents that work for them as Neighborhood Listing Agents helping dispose of REO inventory. The first tasks that REO Agents are charged with by lenders are to make sure that all transactions are done in compliance with all applicable local, state and Federal laws. The last things anyone wants in the REO industry is to have a property tied up or a sale to fail do to non-compliance with the rules. Legal issues, tenancy status, zoning and code violation, recording of deeds etc often make the initial phase of getting properties on the market slower than many anxious buyers would like, particularly if a buyer has targeted a property for some time. Any title issues need to be resolved no matter how long it may take even though it may be mind numbingly long to the uninitiated buyer. That being said, in the case of all these things, consumers are well served to be patient – as a general rule any problem not resolved prior to closing can come back to haunt an REO homebuyer tenfold after closing, and the REO seller’s work diligently to resolve these issues. After the legal issues, there are three basic areas that all REO sellers’ have made of super importance and abundantly clear to their agents: these are Information Security, Anti-Blight Campaigns and Relocation Assistance Programs.

Information Security is a huge concern to all of us in today’s hyper technological world of money and transfers; we’ve all heard horror stories about identity theft. REO Seller’s, who use the internet extensively to manage their assets, don’t want consumer data lost or used inappropriately. Most non-REO trained real estate agents are part-time and do not have extensive computer skills – many “do business the way we always have” and actually can be dangerously ambivalent to the level of private information. REO Sellers know that part-time and “old time” real estate agents are on the top of the target list for professional identity thieves and want to know that the REO Agent’s they hire are doing all they can to protect consumer’s personal information. REO Agent’s typically are required by the bank’s that list REO properties with them to follow these basic policies: 1. Maintain lockable file cabinets. 2. Have a clean desk policy – meaning files are left out of unsecured storage when they are not in use. 3. Confidential documents should be shredded not just thrown in the garbage. 4. Use encrypted e-mails when sending personal information. 5. Never send copies of checks, checking account numbers, Social Security numbers or credit information over the internet. 6. Avoid clicking on unknown links. 7. Maintain written Security Policies and make sure they are understood and enforced within the organization.

Anti-Blight Campaigns have become significant factors in the REO business over the last few years. Banks with REO Properties and Foreclosed homes do not want consumers to be go down the street and be able to pick out the REO’s do to lack of yard care and basic maintenance. Fannie Mae and Freddie Mac as well as many large regional banks know that the money they spend on maintenance will be paid back to them many times through quicker, easier sales requiring less discounting of price. Code Violations, unsecured properties, health and safety issues are all issues that the Full Time Professional REO agent is supposed to handle for the REO Seller. The REO agent is the number one point of contact and serves as the eyes and ears of the REO seller in neighborhoods. REO sellers are increasingly following up with random property checks and requirements for weekly dated photos to be sent to assist in verifying that the lenders REO’s are properly cared for and marketed.

Cash for Keys and Relocation Assistance Programs once unknown are now common place in the REO Industry. These programs are designed to help the occupants of homes that have gone to foreclosure move on. Many times REO properties are occupied by the former owners who have become what is legally know as “Tenants at Sufferance”. Many times they occupied by the friends, relatives or tenants of the Former Owners, any and all of whom need to have their occupancy resolved before the property can be sold as an REO. It is not unusual for an owner to have moved out of a property after it has gone to Foreclosure and rented it after the Foreclosure – this is not actually a valid lease – but the occupants needs still have to be addressed in some form. Most REO institutions have strict policies for agents who negotiate with occupants of Foreclosed Properties: 1. The owner’s of REO are making a Relocation Assistance Program/Cash For Keys offer to encourage occupants to leave as soon as possible – less time than an eviction would take. 2. REO Institutions have a range of offers that a REO Agent can make general determined by the property type location and condition. REO agents are not allowed to offer less than these amounts. 3. REO agents are expected to deal with occupants honestly ethically and fairly but remember they do work for the REO Investor and must keep the REO Investors interests first.

 

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

 

 

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Strange, but True: Your House Price Drops but REO Properties go up in Price!

May 10th, 2012 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

According to several industry sources the average value of bank owned, REO Properties, has actually increased in the last years while the value of non-bank owned real estate has dropped on average! There are several reasons in the realm of conventional wisdom as to why this is happening; the most common reason given is that REO properties are being bought up by investment groups and turned into rentals thus driving up the price of REO’s on average. While this certainly is a factor there are other factors that are probably more important to the change in real estate values that I see happening as a “boots on the ground REALTOR”.

Here’s how I see it. The initial wave of foreclosures was for the most part badly maintained and marginal properties: no real surprise that the most marginal home owners were the least able to maintain and upgrade their homes and least able to hang on through tough, tougher and tougher economic times. These homes languished off the market as so called “shadow inventory” for months and in many cases years due to a hostile regulatory and legal environment in which mortgage holders found themselves, thus slowing up the process of foreclosure, resale and return of these residential assets to productive use. No news there really. What the facts recently made public noted about rising REO prices and declining price on non-bank owned real estate indicates is not that we are “moving toward the middle” but in-fact indicate that we are continuing to crater the housing market in slow motion.

This pattern of rising REO value reflects exactly what many experienced REO REALTORS have noted over the last six to nine months: we are getting better quality inventory. The better quality inventory is the result of the economic damage moving up the food chain from the economic bottom into the middle and above. The middle class buyer that bought his house at a fair market price in 2009 is likely to find that when he goes to sell his home today it’s worth the same or a little less and that any improvements he made have added little or no value. So, if they can’t hang on and they can’t sell they let it go. Thus leading to a better class REO property and putting further and continuing pressure on the middle of the market.

What does it all mean? It means that there is no foreseeable improvement coming for non-REO properties and that REO properties will continue to dominate the residential real estate market. Warren Buffet is right: single family homes are likely to continue to be an excellent investment for those who can“buy and hold” but only for those who can buy and hold either as owner occupants or as investors looking at increasingly higher and higher rents over the foreseeable future.

 

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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ServiceLink and PartnerFirst recently announced a renewal of their agreement in providing solutions for the nation’s housing crisis.

March 21st, 2012 | Posted by Dick Thackston in Uncategorized - (0 Comments)

CORONA, Calif., March 12, 2012 /PRNewswire via COMTEX/ — PartnerFirst is pleased to announce the renewal of its contract with ServiceLink as its nationwide short sale agent network. Through this alliance, now entering its third year, thousands of distressed homeowners can use PartnerFirst agents to resolve their mortgage problems.

PartnerFirst powers the ServiceLink Short Sale Agent Network which connects distressed homeowners with qualified real estate professionals. Through its education platform, including the Pre-foreclosure Specialist Certification (PSC), PartnerFirst educates agents to help distressed homeowners.

Regarding the ongoing alliance with PartnerFirst, Leo Esposito, ServiceLink’s Senior Vice President of Loss Mitigation and Asset Disposition, said, “ServiceLink is pleased with the agent education services and the quality of agents provided by PartnerFirst to power the ServiceLink Short Sale Agent Network. This marks the third year that the two firms will be working together to achieve solutions for the nation’s housing crisis.”

ServiceLink, the national lender platform of Fidelity National Financial, has managed over $10 billion in short sale transactions, working with five of the nation’s top ten lenders. With its experience in working with lenders, investors, mortgage insurers, and junior lien holders, ServiceLink has the flexibility to provide efficient solutions and expeditious closings.

The short sale alternative preserves neighborhood values, minimizes loan loss severities for investors, and provides a dignified resolution for distressed borrowers.

For more information, or to sign up as a ServiceLink short sale agent, visit: http://www.servicelinkfnf.com/downloads/ShortSaleAgentPackage.pdf .

SOURCE PartnerFirst

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The Three Es of Real Estate in 2012?

January 17th, 2012 | Posted by Dick Thackston in Mortgage News | Real Estate News - (0 Comments)

By Dick Thackston

2012 is likely to be defined, in the real estate world, by three “E’s”: Expectations, Employment and Europe/Economy. No matter what your political belief system is, no matter how much or how little money you have, these three factors will permeate American life and the economy more than any others in the next eleven and a half months.

Expectations: In the world of sales there is an old truism, “To live with the classes sell to the masses!” those will be the watch words for real estate this year. 2012’s real estate will almost certainly only be about first time buyers and large volumes of REO properties being sold to investors. Both first time buyers and investors have some striking similarities: both groups feel they are buying at the bottom of the market and both groups have an expectation of housing prices increasing over the next three to five years and both groups have an expectation of rents remaining and going higher. (Personally, I agree with both groups.) First time buyers not only have the family formation/nesting instinct driving them into purchasing, but they have the ever increasing cost of renting versus home ownership. Most first time home buyers are renters now and are looking at homes that will have monthly mortgage payments 15-20% below their current rent. Landlords/Investors are looking at the exact same equation from the other side and seeing that almost anything they buy now will have positive cash flow of at least 10% and often up to 20%. The group that is melting away at this time is the investors looking to buy, fix and flip, the risks are too great of carrying a vacant property or over improving and taking a hit in what is in fact a flat market, and of course move-up buyer’s remain effectively locked out of the market for the foreseeable future. Until move up buyers can sell and move there is likely to be no updraft in the real estate market, but when it does begin it will be huge.

Employment: In New Hampshirefor sure, the Northeast in general and for the nation probably, employment getting better.New Hampshire has experienced job creation. Not dramatic but some. GivenNew Hampshire’s favorable tax and business environment it’s not really surprising that it would be one of the first parts of the country to recover. New England more generally seems to be getting better although not at the same rate as New Hampshireand the nation, well let’s face it would be hard to screw things up much more – which is a perverse kind of improvement actually. So as workers become more secure in their outlook on employment, they become more confident that they can cope with a mortgage payment and the other cost associated with home ownership, and are feeling much better about leaving their apartments and Mom’s basement. This is having a very noticeable effect on stabilizing the market at the bottom.

Economy: The macro-economic environment remains dicey. I almost headed this section “Europe” as my third “E” but really it’s bigger than all that. The United Sates is no longer insulated from the rest of the world economically. I doubt that this was ever really true, but we felt it was true and we certainly acted as if it was true. The United States remains the world’s largest economy however it remains subject to outside shocks: Tsunami & nuclear disaster in Japan, economic slowdown in China and most dramatically European debit crisis – country by country bad news out of Europe send shocks through our financial system and impacts our banking sector. The largest of these in public perception is Europe which is unlikely to be resolved anytime soon and will continue to drag on the world economy. China seems to have better managed its financial affairs – easier in a totalitarian state – and seems likely to have a softer economic landing than Europe.

What’s the take away from all this? Housing is stabilizing now; sales volume is likely to increase significantly; good deals from a buyer’s perspective are likely to remain the norm for the next eight to twelve months; no real appreciation in real estate as an asset class is likely and value added efforts for renovations will remain high risk till after the end of 2012.

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Is Mortgage Lending Getting More Consumer Friendly in 2012?

January 12th, 2012 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

By Dick Thackston

I continue to read about mortgage credit terms such as Credit Scores, Down Payment Requirements, and so forth being eased on home purchases. Federal Reserve Senior Loan Officer Survey still reports historically tight standards. Part of the problem from what I’ve seen, is values coming in low on appraisals after the buyer and seller have come to terms, which in my opinion, reflects tightened appraisal standards. (Appraisers don’t want to be held responsible for over valuing properties – as they have been in the past – even though local market conditions support values.) It’s odd because in my experience appraisers who “know local areas” almost always have a clear sense of what is going on in a market; the biggest problem is large un-named government backed lenders that bring appraisers in from 200 miles away that often do not have a sense of the nuances for local markets that even underwriters can pick up from a desk 2000 miles away. Ultimately, sloppy work is sloppy work and it creates a drag on the entire process.

If home prices are stabilizing, as many people feel they are, this will actually be a bigger problem because house prices will no longer “always be lower than last month” and buyers will be bidding up prices which won’t be adequately reflected in comparable sales from a few months earlier. Low appraisals serve to drive prices down and create a self fulfilling cycle of ever lower prices. If appraisers are better able to justify the sellers price this may in fact be a key to breaking the cycle of pain in real estate we have seen.

Lenders have clearly been working to slow the pace of REO properties coming on the market; to be sure there are plenty of lender owned homes available and they still represent the majority of sales in all market despite everyone’s desire to deny the fact; this decline in the speed at which REO properties are coming on the market is likely to be a big part of stabilization. Once there is any perception of stabilization in the market it seems likely to me that many buyers will “pile into the market” and then be confronted with the challenges of getting a new loan – back to the appraisal and underwriting issues. The entire process is likely to be painful but rewarding for those with the constitution to push through: sellers and buyers both.

Re-financing has gone nuts by all reports from our friends in the lending business with home mortgage rates at historical, probably lifetime lows, loan officers actually have trouble keeping up with the volume of business they are processing. The good news here too is that a much lower percentage of these home mortgage re-finances are taking cash out unlike the past re-financing booms, this time the home mortgage re-finances seem to be more focused on actually reducing cash flow burdens on households, where as in the last fifteen years the home mortgage re-finance booms have been more focused on stripping homes of their equity to finance current consumption.

Mortgage lending in 2012 is probably less consumer friendly than in most of the last twenty years in the sense of underwriting standards and appraisal issues, however loans are being made and the process is sufficiently painful so that borrowers seem to really be paying attention to their reasons for going through the process and is getting done in a way that will lead to a healthier housing market in the foreseeable future.

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Whats Real Estate Gonna be Like in 2012?

January 5th, 2012 | Posted by Dick Thackston in Uncategorized - (0 Comments)

WHAT’S REAL ESTATE GONNA BE LIKE IN 2012? By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT

2012 is looking like it’s shaping up to be the year of the buyer. The winter months so far here in the Northeast have been unusually busy with buyers poking around virtually ever listing – mind you it has not been hundreds or even dozens of buyers coming out to Open House like in the mid 2000’s but there’s been plenty of action. Over the holiday week virtually every REO listing I have has had one or more showings.

Conventional wisdom says that the buyers are going to remain primarily investors and first time buyers.

The investors were out in force in the month of December probing banks and making low offers hoping that banks would take massive price hits to get properties off their books and closed by 12.31.11. I don’t know of any of these offers that went anywhere, clearly these investors do not understand the obligations or objectives of asset manager’s or company’s working out REO inventory on behalf of investors. The truth is that it costs very little to hold a property and with rare exception the REO assets are priced to the market and there is NO incentive for REO assets to be dumped just because it’s the end of the year. As a practical matter most lenders run on fiscal years that don’t end on 12.31 so it’s just another day – many do not even use natural quarters of the year for the end of their businesses. That being said many excellent transactions were originated in the month that were great opportunities in the medium and long time frames. I had one experienced investor come into my office and talk for about forty-five minutes today about how he has changed his strategy to conform to the current climate.  Now mind you this man has been buying, selling and building houses in this region for over thirty years. Traditionally he has picked up land and renovation projects in the down turns and built new homes or renovated and flipped, but he has changed his tack for now. He can’t build profitably and doesn’t want to “build for practice” so he’s banking land assets and buying moderately poor condition homes and stabilizing them with the plan of renting them out. I asked him how many did he plan on doing and he said he’s done nine clean-up and rent outs in the last six months of 2011. His business model is to acquire single family homes and renovate for a total of $75,000 or less which gives him about a 20% gross return based upon is average rent of $1,200. Not bad when you look at your other investment alternatives.

First time buyers are also out in force. They are of course first time buyers and have lots of information, most of which is bad, and lots of input from family, most of whom know less than the first time buyers. These folks are getting transactions together and they are closing, but it is very painful for them because regardless of the input from REALTORS who are actually trained as a buyer’s representative, (like me I am both an Accredited Buyer’s Representative and an Accredited Buyer’s Representative Manager through the National Association of REALTORS), they tend to listen to friends and family who bought homes at sometime in the past, and this is definitely not your Uncle Louie’s real estate market. Big changes for buyers are that no REO Manager will consider an offer that doesn’t have a high quality pre-qualification letter along with it – these REO managers don’t do wishful thinking, they want to know that the buyer can perform or they won’t consider tying up inventory. Other big changes are that when the REO contracts are accepted and they call for closing by a specific date there are penalties to the buyers for not closing on time or not completing inspections on time. The REO managers aren’t kidding when they say as is where is and close on time – this is very different from what most buyers came to expect in the last few years of the real estate boom. Most sellers and their agents became really flexible on dates and repairs because they knew intuitively no mater what the buyer wanted they were still making a killing on their property: that would not be the REO market – no matter what the REO’s are loosing money for the investors behind them and they are tremendous opportunities for the buyers who will live in them for a period of years and pay down there loans and sell later in a better time.

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Up to Four Million Foreclosures to be Reviewed by Government!

November 3rd, 2011 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

By Dick Thackston CRB, ABRM, ABR

The Office of the Comptroller of the Currency has begun sending out letters to borrowers who have faced foreclosure since 2009. It is estimated that approximately four million borrowers foreclosures may have been mishandled between January 1, 2009 and December 31, 2010. Federal regulators and most of the nation’s largest home mortgage servicers announced earlier this week.

Cases will be reviewed by Federal Regulators as a result of an agreement established in April of this year in which the nation’s fourteen top mortgage servicers agreed with regulators to hire independent consultants to evaluate foreclosure processes and determine if borrowers had experienced financial injury as a result of errors or abuses by servicers. It will be up to the independent consultants to evaluate cases and determine compensation if any due to borrowers.

The Comptroller of the Currency as well as the Federal Reserve will be sending mails between now and the end of the year to notify potential victims of their rights. A mass media campaign is planned as well to direct borrowers to the website www.IndependentForeclosureReview.com or the toll free number 888.952.9105. All requests for review must be submitted by April 30, 2012.

The mortgage servicers and the government agreed that the servicers would pay all the expenses associated of setting up the program. Under government supervision they have hired eight independent consultants that have designed the program to be at no cost to the borrowers. The consultants have set up the website and call center noted above. The program is designed to encourage borrowers from all lenders to use one portal and there is uniform branding and product design to be clearer in the public mind than a number of different sites would be to the public.

There are several basic patterns that the consultants will be looking at to determine wrongdoing and these include miscalculation of fees, a foreclosure that happened while a borrower was under bankruptcy court protection and the most common one in my experience a foreclosure that was done while a borrower was waiting for a response on a loan modification.

This program is a direct result of last year’s robo signing scandal and the investigations that followed. About a year ago it came to public light that many mortgage servicers were cutting corners on due process when foreclosing on properties and either not properly executing documents or simply faking documents to expedite the large number of foreclosures they had on their hands.

This program is a good solution to an unfortunate situation. Objectively, most of these borrowers were in fact behind and many if not most were ready and willingly left their properties to begin over, however that does justify short cutting the legal protection of property rights built into our system of property ownership over the last thousand years from Common Law to Current Law.

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