KeNo's Housing and Economic Portal: Thursday June 17 Housing and Economic stories

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TOP STORIES:

New rule says banks must prove ownership before foreclosing (New rule?) - (www.miamiherald.com) Foreclosure filings have backed off this year compared to 2009, but it may not be a brightening economy causing the decline. A new Florida Supreme Court rule requires lenders to verify they are the actual owners of a home before making the initial case for foreclosure. Show me the ``note,'' in other words. The problem is the notes -- legal promises from borrowers to repay a debt -- have been sold and resold, bundled into securities, scanned into computers, sealed in unknown vaults and lost in various other ways as homes got caught up in the puzzling markets of the real estate boom. ``The original note is something very significant, and they just seem to have lost thousands of them,'' said Boca Raton attorney Marlyn Wiener, who handles real estate cases. ``Nobody knows where the stuff is.'' The new rule was approved in February with the intention of unclogging the foreclosure courts, which have an estimated statewide backlog of 500,000 cases. It also gives judges power to sanction plaintiffs who make false accusations on the ownership of notes, or missing notes. Law firms handling the foreclosure overload, sometimes called foreclosure mills, have routinely filed a ``lost note'' claim with the original default notice, regardless of whether they looked for the note, said Miami-Dade Circuit Court Judge Jennifer Bailey.

Defaults on Apartment-Building Loans Set Record for U.S. Banks - (www.bloomberg.com) Defaults on apartment-building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter, almost twice the year-earlier level, as more borrowers failed to repay debt approved near the market peak, said Real Capital Analytics Inc. in a report. Defaults on so-called multifamily mortgages rose from 4.4 percent in the fourth quarter and from 2.4 percent during the same period in 2009, the New York-based real estate research firm said today. Commercial-mortgage defaults also rose in the first quarter for loans against office, retail, hotel and industrial properties, Real Capital said. “Apartment defaults are leading other commercial real estate,” Sam Chandan, global chief economist at Real Capital, said in an interview. “Banks tended to make more aggressively underwritten apartment loans earlier during this last cycle. Credit and pricing reached their peaks for office properties and other commercial assets later.” The global recession cut demand for U.S. apartments, office space, retail shops, hotels and warehouses during the past two years as jobs disappeared and consumers cut spending. Defaults on apartment-building mortgages surpassed the previous record, set in 1993, for the past three consecutive quarters. The U.S. savings-and-loan crisis drove apartment-building defaults to 3.4 percent in 1993. Defaults on other types of commercial property debt peaked at 4.6 percent in 1992, according to Real Capital.

Strategic Defaults Are Endangering Dead Real Estate Market - (www.nuwireinvestor.com) Housing rescue measures like HAMP have failed to address the prevalence of strategic default, viewed increasingly as a valid option that has even spawned its own industry. Negative equity levels play a key role in the decision to abandon ship on underwater mortgages, an epidemic that is mostly contained in a handful of states and reversible only by broader economic and job recovery. To learn more on this, see the following article from Money Morning. A growing number of homeowners who owe more on their mortgages than their property is worth are opting for "strategic default," which means walking away from their homes, even though they can afford to make their monthly payment. If the trend accelerates, it could put more empty houses on a market that's already overburdened with vacancies and snuff out any recovery in the moribund housing market. Right now, more than 10% of borrowers are 25% or more underwater on 4.9 million mortgages. The total valuation could saddle banks with as much as $656 billion of bad loans, according to the latest report from Corelogic.

Utah's foreclosure crisis: Worst lurks ahead - (www.sltrib.com) Before a life-altering off-road vehicle accident in American Fork Canyon, Clancy Talbot of Bountiful earned as much as $10,000 per month selling identity theft protection. Now, tens of thousands of dollars in medical bills later, she may be about to lose her home. For eight months after Talbot's July 2008 accident -- she was literally impaled by a tree -- the 37-year-old mother of three could not work. She and her husband modified one of their mortgages, but have not been able to refinance the second. They've tightened everywhere they can. Payments are ballooning and the total is now more than they can afford. Similarly painful stories are playing out statewide as Utahns in dramatically rising numbers confront financial disaster, defaulting on their mortgages and losing their homes. More than 22,000 homeowners in Utah found themselves in some stage of foreclosure between July 2008 and April 2010, according to a Salt Lake Tribune computer analysis based on data from RealtyTrac, which tracks U.S. foreclosures. And having lagged behind other hard-hit regions where housing markets are now slowly improving, Utah has yet to reach the peak of its crisis.

Warning: Crash dead ahead. Sell. Get liquid. Now. - (www.marketwatch.com) Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits." Bears beating bulls. No, no, "it's a buying opportunity," says another legend, hedge fund manager, Barton Biggs. Buying opportunity? For who? Remember, Biggs isn't advising Joe Lunchbox about what to do with his little 401(k). Biggs' customers are mega-millionaires in his $1.5 billion Traxis Partners Fund. Main Street investors like Joe are prey in his casino. Read on, you decide: As you stare from high up in the nose-bleed bleachers watching the game, staring at a Dow that not long ago was above 11,000 and heading for 12,000. Now the Dow's sitting on the bench, ready for the showers, weak after a couple air balls around 10,000. No more timeouts. "This game's in the refrigerator." How bad is your bookie's point spread in this game? A blowout? Will the Dow drop below 9,000 again? Now that it's broken technical supports, will it drop below 6,470, where the last bull rally started in early 2009? Can you handle the nerve-racking volatility generated by Wall Street's high-frequency traders playing the game at warp-speed with algorithms making thousands of micro-bets in milliseconds, betting billions daily? So who should you listen to? Barton and I arrived at Morgan Stanley about the same time. He stayed decades longer, became one of the world's leading strategists, advising the kind of high-rollers who also bet at private tables in a Vegas casino. You remember Biggs: In his book "Wealth, War & Wisdom" he advises his high rollers to prepare for a "breakdown of the civilized infrastructure." Buy a farm: "Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson." Biggs is not advising small investors on what to do with their 401(k)s.