KeNo's Housing and Economic Portal: Thursday November 5 Housing and Economic stories

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TOP STORIES:

Foreclosures: 'Worst three months of all time' - (money.cnn.com) Despite signs of broader economic recovery, number of foreclosure filings hit a record high in the third quarter - a sign the plague is still spreading. Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday. "They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country. The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

JPMorgan Pitches Interest-Only Mortgages to Boost Obama Plan - (www.bloomberg.com) Banks will push the Obama administration to expand its mortgage-modification program to allow interest-only periods on reworked loans, seeking to bring more homeowners into the initiative while recognizing concern that it may only postpone defaults, according to JPMorgan Chase & Co. “We’re working with our peers to develop a proposal to present,” Douglas Potolsky, a senior vice president at JPMorgan’s Chase home-loan unit, said yesterday at a Mortgage Bankers Association conference in San Diego. The suggestion reflects a new round of ideas and plans to refine the $75 billion “Home Affordable” program, announced in February as a bid to rework as many as 4 million loans to ease a housing slump now showing signs of ebbing. The program’s latest phase also is marked by a need to permanently convert more than 500,000 trial modifications by collecting paperwork so consumers’ mortgage payments don’t revert within months. “Our primary goal for the next few weeks is to make sure we convert all of those borrowers, or as many as possible,” Laurie Anne Maggiano, director of the Treasury’s policy office for homeownership preservation, said at the conference. “It’s a huge push for the Treasury and all of its partners.” Only “a couple thousand” conversions have been completed, Maggiano said. To aid the process, the government last week streamlined documentation requirements, and granted borrowers and loan servicers on initial trials an extra two months to complete the work, which typically must be finished after three months of timely payments, she said. ‘Short Sales’: By next week, the Treasury will announce details of a program to encourage so-called short sales of properties -- for less than mortgage amounts -- by homeowners who don’t qualify for modifications, Maggiano said. It will include “capped” payments to retire second mortgages that may form an “industry standard” and help curb the “back and forth” with owners of that debt which creates one of the biggest hurdles, she said.

Letting Goldman roll the dice - (blogs.reuters.com) On this morning’s conference call, David Viniar, Goldman Sachs’ chief financial officer, emphasized the bank’s valuable social role. His bank made markets and provided credit when other financial players were suffering. But is Goldman really such an indispensible financial intermediary? One look at the firm’s revenue breakdown shows that it’s more casino than anything else, and some of the markets it makes still put the economy in danger. With markets recovering and competitors falling away, Goldman’s trading and principal investment revenue through the first nine months of the year was nearly $24 billion, on pace to break the $30 billion record set in 2007. Goldman, in other words, generates most of its revenue trading its own money and earning vigorish on customer transactions. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business thrown in for good measure. With that in mind, one is left to wonder whether Goldman was really worth saving last year. What have taxpayers received for $50 billion worth of cash and guarantees, for giving Goldman access to the Federal Reserve as its lender of last resort? Saving Goldman was largely about saving the derivatives market, which is so big and unstable that the death of one counterparty could mean the death of all. With big commercial banks like JPMorgan Chase in deep, saving the derivatives business was as much about protecting depositors and maintaining the integrity of the payment system as it was derivatives themselves. Many of us didn’t like it — we thought banks like Goldman should have been recapitalized the right way, by wiping out shareholders and forcing subordinated creditors to eat their share of losses. But that ship has sailed. We socialized the risk while privatizing the profit because we were told we had no other choice: The government had to guarantee the biggest banks’ liabilities because they were too unstable to survive bankruptcy or FDIC receivership. If that’s true, why haven’t we seen any substantial reforms to reduce systemic risk? Congress is kicking around new resolution authority to help resolve failed systemically-important banks. But the goal should be reducing systemic risk to begin with. Yet serious reform of the derivatives market — something that would reduce its size significantly — is nowhere on the radar. Indeed, Goldman’s trading results suggest that market is coming back with a vengeance. It’s playing in very risky markets with a capital structure that remains vulnerable yet is guaranteed by taxpayers.

S. Fla. foreclosures surge - (www.miamiherald.com) Foreclosures in Miami-Dade County surged 94 percent in September compared to a year ago, with 5,721 homeowners receiving word their lenders had initiated foreclosure proceedings. In Broward, the rate rose two percent, with 3,493 homes entering foreclosure. The monthly figures released Thursday by RealtyTrac -- which tallies new filings, scheduled auction sales and homes that were returned to lenders -- suggest rising unemployment may be worsening the region's foreclosure problem. In Miami-Dade, some 1,312 homes were slated for auction in September and 687 were reclaimed by banks. In Broward, 1,769 were scheduled for public sale and 1,280 were taken back by banks. Broward and Miami-Dade ranked sixth and seventh, respectively, among the worst performing counties in Florida. St. Lucie County ranked first. Statewide foreclosures rose 15 percent compared to a year ago, with a total of 55,036 homes in some stage of foreclosure. In September, Florida ranked third nationally. For the third quarter, the rate in Miami-Dade was up 52 percent, compared with the same three months a year ago. In Broward, foreclosures rose 27 percent in the period ending Aug. 31.

Riverside and San Bernardino Shadow inventory - (housing-kaboom.blogspot.com) Here's a long and boring read about shadow inventory. This is a report put together by the Amherst Securities Group for their investors. There report starts off with... With the apparent stabilization of home prices and the increase in new and existing home sales, many investors believe the housing market has bottomed, and is beginning to recover. We believe this optimism is premature. We acknowledge that there are a lot of positives in the market—prices have fallen significantly and housing is more affordable than at any point over the past 2 decades. The tax credit for first time home buyers has helped spur purchase activity. However, investors are overlooking one critical factor—the size of the “housing overhang”; i.e., the # of loans in delinquent status or in foreclosure. We estimate the housing overhang at 7 million units – these loans are destined to liquidate, and are creating a huge shadow inventory. Interestingly, they used the city of Riverside as an one example.
The break out is as follows:
- For Sale = 1,372 Units
- Banked Owned (but not yet listed) = 1,362 Units
- Auction Date Announced = 1,916 Units
- Notice of Default Issued = 2,360 Units
- Total Probable Inventory = 7,010 (1,372 + 1,362 +1,916 + 2,360)
As of 2007, City-Data.com reports that the city of Riverside, CA had 34,854 mortgaged residential units. It is one of the cities in the San Bernadino/Riverside County areas that experienced rapid home price appreciation during the bubble, with median home prices escalating from $136,000 in 2000 to a 2007 median price of $423,400 (for a 17+%/year price appreciation). Using Loan Performance data, we estimate that almost 50% of the mortgaged properties in the city were financed with Alt-A, Pay Option, or subprime loan product. Recent median sales data indicate that home prices have fallen nearly 60% from the peak. Thus, the Trulia numbers imply a staggering 7,010 potential properties for sale in Riverside, out of only 34,800 units (thus 20% of all properties!). Stated differently, total inventory (actual listings + REO + Auction Date Announced + Notice of Default issued) are actually more than 5X the number of units listed “for sale.” And this doesn’t take account of homes backed by loans where a Notice of Default has not yet been filed.