Housing Starts Rise 5.8 Percent in April 2010
RISMEDIA, May 20, 2010—Nationwide housing starts rose 5.8% to a seasonally adjusted annual rate of 672,000 units in April 2010 as the deadline for an important home buyer tax incentive arrived, according to figures released by the U.S. Commerce Department.
“While some of the starts activity noted in the report reflected homes for which buyers had just signed a contract at the tail-end of the tax credit program, the rest was probably tied to builders replenishing their inventories in preparation for the post-tax credit era,” said Bob Jones, Chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “That said, builders are maintaining a cautious attitude with regard to new building as the economy and housing markets slowly recover.”
“The government’s latest numbers indicate that production of new single-family homes got a substantial boost in April as the tax credit program wrapped up and builders worked to resupply their depleted inventories,” agreed NAHB Chief Economist David Crowe. “As our latest surveys have indicated, builders are anticipating that factors such as low mortgage rates, attractive prices and the recovering employment market will replace the tax credit as incentives to buy. Meanwhile, the drop-off in building permits in April indicates that builders are working down the inventory of permits pulled in the previous month and taking care not to get ahead of the market. Builders also continue facing difficulty in obtaining project financing, which will limit the pace of a housing recovery.”
Single-family housing starts surged 10.2% to a seasonally adjusted annual rate of 593,000 units in April, the strongest rate since August of 2008. Meanwhile, multifamily starts posted an 18.6% decline to a 79,000-unit rate, offsetting a big gain posted by that sector in the previous month.
Permit issuance, which can be an indicator of future building activity, declined 11.5% overall to a seasonally adjusted annual rate of 606,000 units in April. This reflected a 10.7% decline to a 484,000-unit rate on the single-family side and a 14.7% decline to a 122,000-unit rate on the multifamily side.
Three out of four regions posted solid gains in new housing production in April. Combined single- and multifamily starts rose 23.9% in the Northeast, 16.7% in the Midwest and 7% in the South. The West registered a 13.3% decline.
Conversely, permit issuance was down in three out of four regions in April. The Northeast posted a 7.4% decline, the South registered a 14.3% decline and the West posted a 16% decline. Permit issuance remained unchanged from the previous month in the Midwest.
For more information, visit www.nahb.org.
March 26, 2010
Home Affordable Foreclosure Alternatives Program on Pace to Increase Real Estate Sales
RISMEDIA, March 25, 2010—Joe Moshe, Broker/Owner, Charles Rutenberg Realty, says the Home Affordable Foreclosure Alternatives (HAFA) program will help stabilize the residential real estate market by allowing the short sale process to move forward more easily. This, in turn, will benefit real estate agents as they perform more short sale closings and homeowners who are attempting to stave off foreclosure.
On April 5, 2010, HAFA, a part of the Home Affordability Modification Program (HAMP) which provides financial incentives to servicers and borrowers to lean toward short sales rather than foreclosures, will go into effect. The law will expire at the end of 2012.
“The Home Affordable Foreclosure Alternatives program is a great effort by the federal government to get the real estate market going again,” says Moshe. “However, we are leery of banks that use their own appraisers, who may not accurately report the true value of the property.”
Under HAFA, borrowers will be allowed to receive pre-approved short sale terms before listing the property, as well as $1,500 in relocation assistance. In addition, they will be fully released from any future liability for the first mortgage debt. In order for the borrower to be eligible for HAMP, it must be the principal residence, the first lien originated before 2009, the unpaid balance must not exceed $729,750 and the borrower’s total monthly payment exceeds 31% of their gross income.
The HAFA program prohibits servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement, up to 6%. In order to implement HAFA in accordance with their own written policy, the servicer must participate in HAMP and their policy must be consistent with investor guidelines.
HAFA also offers up to $1,000 in investor reimbursements for allowing up to $3,000 in short sale proceeds to be paid to subordinate lien holders. If a subordinate lien holder receives financial incentives from HAFA, they must agree not to pursue any deficiency judgments.
“With a more streamlined process for short sales now being put into place, we should see fewer foreclosures, helping to stabilize the housing market in the near future,” Moshe says. “The program will also allow our real estate agents to close more short sales without being at the mercy of the subordinate lenders and keep more of their commissions.”
In a short sale, a homeowner owes more than what their home is currently worth. To avoid foreclosure, the homeowner settles with the mortgage lender to accept less than what they owe on the property. As a result of this agreement, the seller is able to fend off foreclosure, the lender avoids taking on the burden of selling the property and the new buyer gets the property at a reduced price. Additionally, the seller will not be required to pay for the deficiency on the loan.
“Before HAMP and HAFA were introduced, the laws rewarded mortgage servicers that were looking to recover all their expenses on a foreclosure rather than opting for a loan modification or a short sale, which meant that the servicer would take a huge loss,” continues Moshe. “In the case of a pending short sale, the mortgage servicers were in charge of making decisions and it was obvious why they chose to foreclose over other alternatives.”
March 16, 2010
Treasury hopes new rules send short sales to the rescue of underwater mortgages (Daniel Baxter For The Washington Post)
With new Treasury Department rules designed to expedite short sales set to take effect April 5, relief can’t come soon enough for some area buyers, sellers and real estate agents who have waded through a long and arduous process to get short sales approved by the bank.
Incentive payments written into the Home Affordable Foreclosure Alternatives Program are designed to help offset some of the financial pain that banks experience when they agree to settle for less than they are owed on a home loan. Mortgage servicers (the companies that accept and process homeowners’ mortgage payments) may receive up to $1,000 for the successful completion of a short sale. Treasury will also pay up to $1,000 to those holding second liens and home equity loans, if they agree to the deal. While junior lien holders have begun to ask for more compensation, the rules now limit incentives to $3,000.
To help speed up short sales, the program calls for lenders to use standardized paperwork and to establish an acceptable sale price before the home is put on the market. Sellers will be allowed at least 120 days to market the home and possibly as long as one year. During that time, the lender cannot foreclose. At closing, the government will give sellers up to $1,500 to cover relocation expenses.
Banks participating in the program have also agreed not to negotiate reductions in real estate agents’ sales commissions after they receive a short-sale contract. Such commission reductions have discouraged some agents from listing and showing short sales, according to the National Association of Realtors.
According to the Treasury rules, a participating loan servicer must offer the short-sale program to a borrower who does not qualify for, or did not succeed at, a loan-modification under the administration’s home affordable mortgage program.
Nationally, 38 percent of all sales in January were distressed sales, which include short sales and foreclosures. In the Washington area, short sales accounted for 6 percent of all sales in Maryland and 8 percent in Virginia during the last four months of 2009. That number is expected to rise significantly in the next several months, according to NAR. Agents have not yet reported short-sale activity in the District.
Some who have worked with short sales, however, are skeptical that the new rules can compress the approval process into 10 days.
“I’ve done five short sales in the past year and, frankly, I don’t want to do another one,” says Cyndy Davis, president of Flaherty Group Realty in Kensington. Her most recent short sale, which required a sign-off from Bank of America, took 10 months.
“I contacted the bank at least every other day, and it still took them 90 days to respond to our first offer on a Silver Spring townhouse,” Davis said. “They took from June until August. Then when we ordered the appraisal, it came in $33,000 below my buyer’s offer. When we resubmitted the new offer, it took the bank another 45 days to respond.”
Mortgage servicers take 90 to 120 days on average to approve short sales, according to NAR.
Juwana Bauwens, a spokeswoman for Bank of America, acknowledged that the process did take that long.
Poll Shows Strong Support for Government Housing Initiatives
RISMEDIA, March 5, 2010—Americans remain strongly committed to federal support for home buyers, according to a recent survey of U.S. households.
Roughly 68% of those polled said the government should continue to support housing, and 65% believe the government should be doing more to keep families from losing their homes to foreclosure.
The poll included both home owners and renters and was conducted for the National Association of Home Builders (NAHB) by RT Strategies, a non-partisan public opinion polling firm based in Washington, D.C. RT Strategies interviewed a representative sample of 1,000 adults nationwide by telephone using live interviewers on January 29-31, 2010. The sample included 170 interviews with respondents from cell-phone-only households.
Among those polled, some key groups said the government should continue to play a vital role in maintaining a healthy housing market. For example, 78% of all potential home buyers, including 81% of renters intending to buy a home in the near future, said the government should continue to support housing.
Roughly 65% of home owners said the government also needs to do more to keep families from losing their homes. Support for more foreclosure protection was not confined merely to current home owners. Among renters, 84% said the government needs to do more to helped strapped borrowers. This issue is particularly important to women, with 71% supporting greater foreclosure protection, compared to 58% of men.
Keeping families in their homes is also particularly important to first-time home buyers, as 78% of young adults under age 30 support greater foreclosure protection. And 69% of adults who are 30 to 44, the prime age range for move-up buyers, said they support more foreclosure protection.
Overall, roughly two-in-three respondents said they own their home. Among renters, about two-in-three intend to buy a home in the near future. In addition, 15% of current home owners intend to buy a home in the near future.
The poll asked respondents for their views regarding the Worker, Homeownership and Business Assistance Act of 2009 that extended a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The legislation, which was signed into law by President Obama in November 2009, also authorized a tax credit of up to $6,500 for qualified repeat home buyers. Overall, 8% of those surveyed said they intend to take advantage of this credit, while another 24% who might have been interested in using the tax credit said they cannot afford to purchase a home at this time. Of the 33% of respondents who said they are planning to buy a home (both renters and current home owners), roughly 17% said they intend to use the tax credit.
Financial concerns continue to be the greatest barrier to growth in the housing market. Among renters nationwide who aspire to own their own home, 39% simply don’t have the money to buy a home at this time, and another 20% said the primary obstacle is that they feel they cannot qualify for a loan. Larger economic issues also play a role, as 18% of those surveyed said that job security is the greatest obstacle they face in trying to buy a home.
Weakness in the housing market itself may be blocking some home owners who would like to buy a new home, as 29% of current home owners said their greatest obstacle to purchasing another home is their inability to sell their current home. Beyond that, among current homeowners who aspire to buy a new home, 7% feel trapped by a mortgage that exceeds the value of their current home, 14% fear that the value of a new home might fall after they make the investment, and 13% say home prices are too high to allow them to buy a new home at this time.
Even amid a housing market downturn, 40% of respondents said their home is their most valuable investment, twice the number who cite any other single investment–401k accounts, savings accounts and CDs, stocks and bonds, or mutual funds–as their leading family investment.
For more information, visit www.nahb.org.
Obama Targeting Homeowners with $1.5 Billion in Assistance By Ronald D. Orol
RISMEDIA, February 23, 2010—(MCT)—Facing millions of foreclosures and high unemployment, President Barack Obama recently announced a $1.5 billion fund to help unemployed homeowners and other struggling borrowers in a handful of states.
“What we can do is help families that have done everything right to stay in their homes, and we can stabilize the housing market so that home values can begin rising again,” Obama said at a town hall meeting in a Las Vegas suburb.
As part of the program, five states—Arizona, California, Florida, Michigan and Nevada—have home prices that have fallen enough to qualify for the additional assistance. Obama said that price declines in homes and high unemployment in these regions have created major challenges for families.
He argued that too many lenders were too focused on “making a quick buck than acting responsible,” that “too many borrowers acted irresponsibly by taking on mortgages they couldn’t afford” and government regulators turned a blind eye to the problem.”
State and local housing-finance agencies in states seeking assistance must submit program proposals to the Treasury Department, which will evaluate and decide if they qualify. The funds are allocated from capital set aside for housing from the $700 billion Troubled Asset Relief Program.
States where the average price for all homeowners in the state have fallen more than 20% from their peak are eligible to participate. The average price for all homeowners in Nevada, for example, has fallen by more than 40% from its peak.
According to Obama, three sorts of problems may be addressed with funding: unemployed borrowers, underwater borrowers and those with second mortgages on properties. “This fund is going to help out-of-work homeowners avoid preventable foreclosures. It will help homeowners who owe more than their homes are worth find a way to pay their mortgages that works for both borrowers and lenders alike.”
Herb Allison, assistant secretary of the Treasury for Financial Stability, told reporters that the allocations are a modest step to stem the housing crisis. However, he added that the program is intended to encourage these states to foster innovative approaches to limit further foreclosures. “Local housing-finance agencies understand the local markets,” he said. “While the housing crisis is national, it takes on local characteristics, and these groups understand the situation on the ground. We want to put to work their creativity and their knowledge to come up with new ideas to test those ideas in their communities.”
Allison added that he hoped the successful programs could help the Treasury Department come up with additional ideas for national programs to help troubled homeowners. “We can learn a great deal from this and see what works in local situations and how we can leverage that.”
Obama announced the program in Nevada, one of the hardest-hit states, along with Senate Majority Leader Harry Reid and other lawmakers. Reid, a Nevada Democrat, is in a battle for re-election in his state, in part due to frustration over high unemployment. The program’s announcement comes two days after the Treasury Department reported that a one-year-old $75 billion program to help 3 million to 4 million homeowners modify their mortgages to avoid foreclosure has only aided a small fraction of those at need.
The program, known as the Home Affordable Modification Program (HAMP), seeks to aid borrowers by allowing them to modify their mortgages and lower monthly interest rates through any participating lender. Under this plan, the lender voluntarily lowers the interest rate, and the government provides subsidies to the lender and borrower. The Obama program has so far only helped 116,000 troubled borrowers modify their mortgages from three-month temporary plans into more affordable permanent loans. The HAMP program, which is set to run through 2012, was announced on Feb, 18, 2009. Allison pointed out that about roughly a million homeowners have had their payments reduced, mostly as part of the trial three-month plans. He added that roughly half of those are eligible for permanent modifications. “We are on pace to help 3 million to 4 million homeowners by the conclusion of the program in 2012,” according to Allison.
Henry Sommer, director at the National Association of Consumer Bankruptcy Attorneys in Philadelphia said he supported the idea of targeted taxpayer assistance to states that need it most. However, he was skeptical whether the vast majority of the $1.5 billion would ever be used. Sommer pointed out that the largest part of the $75 billion HAMP program so far hasn’t been allocated—in large part because only a small number of households have received permanent modifications, which is when the majority of incentive payments go out. “They are supposed to spend $75 billion, but aren’t using it,” he said. “I am concerned that even though they announced this program, that the funds in it won’t be used.”
Sommer added that he was interested in seeing what kind of programs the Treasury would approve to be eligible for access to funds.
A program to help troubled homeowners who have taken out second mortgages on their homes could be helpful, if it provides high-enough incentive payments to convince lenders to drop the second mortgages. Sommer recommends a regional program that gives banks “a few thousand dollars” to drop second mortgages. “Banks don’t want to give up the second mortgages because it is a big hit on their balance sheets,” he said. “However, they’re not worth anything if the homes are sold in foreclosure.”
Federal funds for other state programs to help the unemployed stay in their homes and programs to help borrowers whose homes are worth less than their mortgages would also be helpful, according to Sommer.
Sommer also expressed concern that some other states with high unemployment and massive foreclosure rates may not qualify for the additional assistance, because the average price for all homeowners there hasn’t fallen 20% or more from their peak. Rhode Island, for example, recorded a 12.9% unemployment rate in December 2009, according to the Bureau of Labor Statistics data as of Jan. 22.
Sommer is hopeful that the Obama administration will focus additional attention and funds to a national program that could help struggling unemployed homeowners—a growing segment of borrowers that are facing foreclosure.
Jaret Seiberg, an analyst at Concept Capital in Washington, said the White House is considering a program that would suspend mortgage payments for jobless homeowners for three months and give the borrower three opportunities to extend the payment deference for up to a year.
The new targeted assistance comes after the Special Inspector General for the Troubled Asset Relief Program on Jan. 21 released a report warning that the Obama administration’s and the Federal Reserve’s policies to support the mortgage market could in fact be creating another dangerous housing bubble in some markets, while at the same time failing to do a good enough job to stabilize other markets.
(c) 2010, MarketWatch.com Inc.