Attempts at Relief and Reform

This is Far From Over...

Posted on Thursday, March 17, 2011

Life Underwater
Some areas of the nation seem to have stabilized for now, but falling home prices in other areas
pushed more borrowers into a negative equity position. CoreLogic's recent study
showed that in the 4th quarter of 2010 23% of borrowers nationwide, or 11.1 million,
were holding "underwater" mortgages which is a collective $750 billion of negative
equity. Negative equity is concentrated in the hardest hit states: Nevada (65%),
Arizona (51%), Florida (47%), Michigan (36%), and California (32%). And although
banks and servicers didn't plan for this, if negative equity continues to rise the
principal write down argument (a major bad idea that will lead to more defaults and resentment) may gain momentum.

The GSEs: To Be or Not To Be? That is the Question.
Are we really better off winding down Freddie and Fannie Most, if not all, of the mortgage and real estate professionals in the US would suggest that we're better off with those agencies staying around in one form or another. Not only because the GSEs help them make a living, but because they’re the folks who actually know how many Americans rely on this industry backing and wont be able to find mortgages in the near future without them.
Dodd Frank, a Work in Progess.
Dodd-Frank is not set in stone. House Republicans are drafting at least five bills to repeal or change parts of the Dodd-Frank financial-overhaul law. that have been opposed by business groups.
Robo-Signer Lives On
In Florida Freddie Mac pulled its cases from the Law Offices of Marshall C. Watson,
a Florida law firm that is under investigation by the Florida attorney general.
The firm represents lenders in foreclosure cases, but is one of four foreclosure
firms targeted by the AG (Attorney General) investigation. Moving hundreds of thousands of cases to new law firms has created what on the surface looks like a drop in foreclosure activity. In reality these cases will move forward as soon as the new law firms get a handle on them. Eventually the homes will be taken back and sold as REO at even lower prices than before due to the additional deterioration they are experiencing thanks to this prolonged timeline. Already the title insurers are responding to a disclosure FNMA is requiring buyers of these homes to sign acknowledging potential legal issues with the title of the homes they are buying thanks to robo-signer issues. The essentially places the risk on innocent homebuyers and the title insurers wont cover that risk – something way too complicated for most folks to understand. Especially with all of this being discussed for the first time at the closing table. The pending joint AG 20 billion dollar settlement is a joke but just the tip of the settlement discussion iceberg to come. Any money needs to go into a settlement funds to reimburse innocent homeowners who end up bearing the brunt of this at the end of the day.
Yesterday we also had Housing Starts & Building Permits. Down, down, down. And the saga continues…

Housing Starts numbers jumped 14.6% in January to a 596,000 annual rate, but the
entire increase came from a 78% surge in multifamily starts following the rush
of multifamily permits in December ahead of building code changes. Single family
starts, which comprise 70% of the market, fell 1%. Last month Permits were down
about 10%. Housing Starts dropped 22.5% and Building Permits dropped 8.2% - painful

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