Archive for April 22nd, 2009
Continue Reading April 22nd, 2009
MDA DataQuick’s John Karevoll gave me a little background on some of the firm’s recent research on loan defaults. Karevoll said he wanted to find out just how toxic the truly toxic mortgages are. He went out and found the worse performing loans of any three month period during the boom. What he found surprised him.
In the worst three month period for loans defaulting—those made from August to November of 2006–some 9% of the loans are now in trouble. While that’s bad, Karevoll says it’s nothing like the 50% default rates some people are talking about. “Those loans may get worse, maybe 10% will default,” he says. “But even in the worst period, when the absolute nastiest loans were made, most of the loans are still good.”
Here are some more of his results: Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice. Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far. Of the 3 million in 2006, 8.5 percent have so far resulted in default. The most toxic period was August through November 2006 which had more than a 9 percent default rate. Of the 2.1 million loans made in 2007, it’s 4.6 percent.
And who were the worst offenders? The lending institutions with the highest default rates for loans originated in August to November 2006 include ResMAE Mortgage (69.9 percent of loans resulting in a default notice), Master Financial (64.6 percent) and Ownit Mortgage Solutions (63.6 percent). Of the major lenders, IndyMac has a default rate on those loans of 18.9 percent, World Savings 8.0 percent, Countrywide 7.7 percent, Washington Mutual 6.3 percent and Wells Fargo 3.4 percent. Less than 1 percent of the home loans originated in late 2006 by Citibank and Bank of America have since gone into default.
Many, if not most, of the loans made in 2006 are owned and/or serviced by lending institutions other than those that made the loans (mortgages are often sold off after the initial lender originates the loan, and are often serviced by a different entity). Many of the originating lending institutions no longer exist.
Read more »
Continue Reading April 22nd, 2009
Lenders filed a record number of mortgage default notices against California homeowners during the first three months of this year, according to the research firm MDA DataQuick.
The company blamed the recession and of lenders playing catch-up
after a temporary lull in foreclosure activity. A total of 135,431 default notices were sent out during the January-to-March period, an all time high in the company’s database which goes back to 1992. That was up 80.0 percent from 75,230 for the prior quarter and up 19.0 percent from 113,809 in first quarter 2008, according.
“The nastiest batch of California home loans appears to have been made in mid to late 2006 and the foreclosure process is working its way through those,” said John
Walsh, DataQuick’s president.
While most first quarter 2009 foreclosure activity was still concentrated in affordable inland communities, there are signs that the problem is slowly migrating into other areas. The affordable markets, which represent 25 percent of the state’s housing stock, accounted for more than 52.0 percent of all default activity in 2008. Last quarter it fell to 47.5 percent.
Read more »
Continue Reading April 22nd, 2009
Here’s what Michelle Meyer of Barclays Capital Research has to say about today’s surprising rise in the home price index of the Federal Housing Finance Administration (successor to OFHEO).
The Federal Housing Finance Agency (FHFA) purchase-only home price index surprised on the upside, once again. The index rose 0.7% m/m in February, following a revised 1.0% increase in January. This left home prices down 6.5% y/y - a notable moderation from the rate of decline at the end of last year. The improvement in FHFA home prices comes as a surprise and contradicts other home price measures such as the S&P Case-Shiller index, Radar Logic, and LoanPerformance. The FHFA home price measure only tracks homes with conforming mortgages, which have fared better during this downturn. In addition, Fannie Mae and Freddie Mac put in place foreclosure moratoriums in December and January, which may have distorted the sample by reducing the flow of foreclosed homes into the market. And more generally, the housing data tend to be quite volatile during the winter since there are fewer transactions. After considering these factors, we are hesitant to take too much signal from these data. That said, we will not dismiss them entirely. We do see signs that home sales are stabilizing and months’ supply is declining in certain markets.
Overall, we believe that national home prices have further to fall. There is a wave of foreclosures set to enter the market, and we think the economy will remain weak, with the unemployment rate climbing to 9.8% by year-end. In our view, the pace of decline of home prices should start to slow, but we do not see a bottom until 2H10.
Read more »
Continue Reading April 22nd, 2009
I made an appearance on ABC News Now yesterday discussing how to negotiate with your landlord for a lower rent. I talked about some of the tips I mentioned here, on the HotProperty blog a couple days ago.
You can watch the interview here.
There are a few things I didn’t have time to get into during the interview. For starters, landlords aren’t lowering rents everywhere. A lot depends on the supply and demand in a particular city or even in a neighborhood.
I’ve heard from some readers who say that their landlords are not budging. I’ve heard from some landlords that they don’t need to give discounts and are getting a bit tired of tenants pushing for a month or two of free rent.
In hard-hit New York City, landlords are being proactive, sometimes lowering rents automatically as leases come up for renewal. Would love to hear your experiences. Send them along.
Read more »
Continue Reading April 22nd, 2009
The U.S. government has captured the cheesiness of YouTube quite well in a series of ten tips on how to avoid foreclosure. There’s the homely plant in the background. The hand-lettered signs. The speaker who conveys the impression that narrating PSA’s is probably not her day job.
Watch the whole series: You might even learn something!
Read more »
Continue Reading April 22nd, 2009
The 26 cities with the highest foreclosure rate in the nation are all located in 4 hard-hit states, with Las Vegas topping the list, according to a report released Wednesday.
Read more »
Continue Reading April 22nd, 2009
Is the Ritz getting less–Ritzy?
Chris Woronka, leisure industry analyst with Deutsche Bank Equity Research notes that late Monday, Vail Resorts announced price reductions on all 71 Ritz-Carlton Vail residential units, including prospective price cuts on those units already under contract (which we believe to be 47). Prices on all unsold units are being cut by 20%, to an average of $1,624/sqft, Woronka writes. Prices on units already under contract will be cut by about 15%, to an average of $1,406/sqft.
Wait, there’s more: New and existing buyers will be given a complimentary social membership to the Arrabelle Club (which retails for $50,000). Buyers who already have units under contract must execute certain amendments to those contracts. Vaild did not specify exactly what the amendments are, but Woronka believes that they could relate to the timing/volume of down payment requirements and/or new restrictions on listing units for re-sale prior to delivery.
The move does not come as a large surprise, he says. Vail did not sell any units during the entire ‘08-’09 ski season. “We believe real estate market conditions in Eagle County have continued to deteriorate to the point where some sort of meaningful adjustment on Ritz pricing became inevitable,” he wrote in a research note. “Although the project could still end up being profitable(assuming the remaining units are sold), we think any profits are now likely to come in meaningfully below the $45m we’ve been modeling for 2011.”
Read more »