WSJ - tax liens triggering foreclosures

A report released this week by the National Consumer Law Center (NCLC), says the number of foreclosures tied to delinquent tax payments is climbing. The NCLC, an advocacy group, estimates that $15 billion of tax-lien foreclosures happened in 2010, the latest year for which data are available. Rising tax-lien problems stem from two overlapping trends associated with the weak economy: To close budget deficits, some local governments are increasing proxy taxes to raise additional revenue. But a growing number of homeowners, many unemployed or living on fixed incomes, are finding those tax bills—even before rate increases—a strain. When homeowners fail to pay, municipalities have the legal authority to foreclose or auction off the tax lien to debt collectors, who can charge interest rates as high as 50% on the outstanding balances. If the homeowner doesn't pay—the deadlines to do so vary across the nation—many states allow the tax-lien holders to take ownership of the properties and resell them. While the sales are causing distress for some homeowners, they reflect hard fiscal realities at the state and municipal level. "Cities and towns are facing their own budget problems and of course need homeowners to make prompt tax payments," says John Rao, an NCLC attorney who wrote the report. Homeowners are slipping on tax payments for the same reasons they are falling behind on mortgage payments, Mr. Rao said: "They're unemployed, or underemployed, expenses have gone up, and you don't have enough money." Advocates for the elderly and the unemployed, the groups most at risk of losing their homes, say it isn't uncommon for consumers with homes valued at hundreds of thousands of dollars to lose the properties after failing to pay a few thousand dollars in taxes. "The system is really counterintuitive," said Laura Newland, an attorney with AARP, an advocacy group for people age 50 and older. "Some of the properties that are most vulnerable are the ones without a mortgage." (Local taxes on homes with a mortgage are often paid by the mortgage lender, which collects taxes from homeowners in their monthly payments.) Frank Alexander, a professor who specializes in tax-law foreclosures at Emory University's law school, said municipal governments selling tax liens are being shortsighted. "It creates short-term cash, but generates long-term problems," he said, pointing out that tax-lien sales and tax foreclosures often spark legal challenges that can last for years and prove costly for homeowners and municipal governments.

A summer of modest economic growth is helping dispel lingering fears that another recession might be near. Whether the strength can be sustained is less certain. The economy grew at an annual rate of 2.5% in the July-September quarter, the Commerce Department said Thursday. But the growth was fueled by Americans who spent more while earning less and by businesses that invested in machines and computers, not workers. The expansion, the best quarterly growth in a year, came as a relief after anemic growth in the first half of the year, weeks of wild stock market shifts and the weakest consumer confidence since the height of the Great Recession. The economy would have to grow at nearly double the third-quarter pace to make a dent in the unemployment rate, which has stayed near 9% since the recession officially ended more than two years ago. For the more than 14 million Americans who are out of work and want a job, that's discouraging news. And for President Barack Obama and incumbent members of Congress, it means they'll be facing voters with unemployment near 9%. "It is still a very weak economy out there," said David Wyss, former chief economist at Standard & Poor's. For now, the report on US gross domestic product, or GDP, sketched a more optimistic picture for an economy that only two months ago seemed at risk of another recession.

Some economists doubt the economy can maintain its modest third-quarter pace. US lawmakers are debating deep cuts in federal spending next year that would drag on growth. And state and local governments have been slashing budgets for more than a year. Obama's $447 billion jobs plan was blocked by Republicans, meaning that a Social Security tax cut that put an extra $1,000 to $2,000 this year in most American's pockets could expire in January. So could extended unemployment benefits. They have been a key source of income for many people out of work for more than six months. Nor is the economy likely to get a lift from the depressed housing market. Typically, home construction drives growth during an economic recovery. But builders have been contributing much less to the economy this time. Wyss said that the collapse of housing had probably depressed annual growth by as much as 1.5 percentage points in the past two years. Paul Ashworth, chief US economist for Capital Economics, predicts that growth will cool in the fourth quarter and next year. "While our baseline forecast does not include an outright contraction, we expect GDP growth to average a very lackluster 1.5% next year," Ashworth said in a note to clients.

Refinance Applications Increase

Mortgage applications increased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending August 12, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 4.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3.6 percent compared with the previous week and was 13.5 percent lower than a year ago. The Refinance Index increased 8.0 percent from the previous week, but was 16.3 percent lower than the same week last year. The seasonally adjusted Purchase Index decreased 9.1 percent from one week earlier. The unadjusted Purchase Index decreased 10.1 percent compared with the previous week and was 1.1 percent lower than the same week one year ago.

“Unprecedented volatility in the stock market last week amid additional signs that the economy has slowed led to further drops in mortgage rates, with the 15-year rate teaching a new low for the MBA survey,” said Mike Fratantoni, MBA’s Vice President
of Research and Economics. Fratantoni continued, “The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines.” The four week moving average for the seasonally adjusted Market Index is up 6.9 percent. The four week moving average is down 2.2 percent for the seasonally adjusted Purchase Index, while this average is up 10.1 percent for the Refinance Index. The adjustable-rate mortgage
(ARM) share of activity decreased to 5.8 percent from 6.1 percent of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.32 percent from 4.37 percent. The 30-year fixed contract rate has decreased for three straight weeks and is at a new low
for this year.

BEREL Sunday International Investing Edition: Wells Fargo Turns to Ireland for Loan Portfolios

Posted by Carole VanSickle on Sunday, August 14th 2011

In a $1.4 billion deal, Wells Fargo has won the Bank of Ireland’s U.S. commercial-real-estate loan portfolio as the Irish bank attempts to deleverage its assets. The portfolio consists of 25 loans sold at close to face value and backed primarily by properties in New York, Boston and Washington[1]. The Bank of Ireland was ordered by Ireland’s financial regulator to deleverage by cutting the lender’s loan portfolio by $43 billion by the end of 2013. Wells Fargo also purchased an additional $1 billion in loans from Allied Irish Banks earlier this year and is now taking aim at a $9.5 billion portfolio of loans in the offing from the Anglo Irish Bank Corporation. The latter includes commercial “trophy properties” in New York City and Chicago.

JPMorgan Chase and Bank of America are also after the Anglo Irish Bank portfolio and have submitted bids on it[2]. Most of the loans are expected to perform through maturity. The sale will also be the first of its kind, since “this is the first foreign bank to sell its entire U.S. loan portfolio, and it will be good test of the market,” said head of global real estate practice at law firm Greenberg Traurig, Robert Ivanhoe.

Do you think it’s a good thing that American lenders are buying back American loans, or should they be doing other things with these billions of dollars?

URGENT!! WE NEED YOUR HELP

The Federal Reserve, which received sweeping new authority under the Obama regulatory reauthorization, wants to effectively eliminate seller-held (a.k.a. purchase money) mortgages. It will do this by enacting a rule for the Dodd-Frank Act prohibiting property sellers from taking back a mortgage unless the buyer essentially can qualify for conventional financing!

What's more, Ma and Pa Homeowner, who create 95% of seller-held mortgages, won't be able to qualify buyers under the same underwriting standards that banks are required to perform, and therefore the cash flow notes won't be created.

If this is enacted it also will remove access to housing for millions of Americans, because seller "financing" is the only way people who can't qualify for conventional loans can buy a house.

Moreover, it would allow a buyer a three year right of rescission (they can cancel the sale) if the seller did not properly qualify them. The right of rescission also applies to anyone who buys the note.

We have precious little time to try to stop this. The deadline to comment is FRIDAY, July 22.

Go to: http://snipurl.com/t2cfq
Then go to snipurl.com/AbilityToRepay to submit your comment to the Federal Reserve.

Please do it TODAY!!

(Thanks to Ric Thom [ www.SecurityEscrow.com] for alerting us.)

Submit your comments at snipurl.com/AbilityToRepay -- scroll down that page for the comments link. THE DEADLINE IS FRIDAY, JULY 22!

Here Are Some Points You Can Make In Your Comments:

• Seller "financing" provides housing for millions who otherwise could not qualify for conventional loans.
  
  
• Homeowners are not bank officers or mortgage lenders. By requiring them (many if not most of whom who take back a mortgage are elderly) to qualify buyers using bank standards means they will simply refuse to sell with owner financing. Thus millions of people will be deprived of home ownership.
  
  
• Why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
  
  
• Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
  
  
• This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
  
  
• By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
  
  
• The restriction of no balloon doesn't affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. A five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
  
  
• There are a lot of small builders that have a spec house or two that they can't sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which does not help housing or the economy.
  
  
• It has been said that a seller financing the sale of his or her own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them.
  
  Go to http://snipurl.com/t2cfq
  Then submit your comments at snipurl.com/AbilityToRepay -- scroll down that page for the comments link.

THE DEADLINE IS FRIDAY, JULY 22!

foreigners jump into real estate market

"Falling home prices may be plaguing the US economy, but they are candy to foreign investors, who already have a weak dollar on their side. Buyers from overseas spent roughly $41 billion on US residential real estate last year, a bump up from the previous year. US real estate agents report a surge this Spring especially, as foreign buyers see continued pressure on home prices and ample bargains. 'I don’t think they’re so concerned about the prices dropping as they are about getting value for their money,' says Rick Ambrose, a Coldwell Banker agent in Lake Mohawk, NJ. Ambrose and his colleague Mary Pat Spekhardt recently hosted two groups of Japanese investors searching for homes on the scenic lake just about an hour outside of New York City. 'They can work here, be close to the city, be close to their corporations and still feel like they’re on vacation. I think that’s really what grabbed everybody.

That’s what got them,' says Spekhardt. The group of about 35 from Japan also toured properties in Las Vegas and Los Angeles, which are more popular choices among foreign investors.

A new survey by Trulia.com that tracks searches from potential foreign buyers found LA ranked number one in potential interest traffic, trailed by New York City, Cape Coral, Fl, Fort Lauderdale, FL and Las Vegas. The greatest interest is from buyers in the UK, Canada and Australia. 'Prices now in the US are generally 30-40% off from the peak. In addition, the weakness of the dollar gives the Japanese an advantage, as it does the Europeans, of another 20-25% off, so they’re seeing real bargains and opportunities,' notes Ambrose. The interest is pretty widespread, with Brazilians trolling Miami and Russians and Chinese hunting in Chicago, according to Trulia's survey.

What's so interesting to me, though, is that foreigners are so much more ready to jump into the market now than US investors. Granted, they have, as noted, the weak dollar on their side, but they also seem to have a longer term view. US buyers are so afraid to lose a little in the short term on paper, they don't realize they could gain a lot in the long term. Of course foreign buyers are largely using cash, which many US buyers are lacking. Credit, or lack thereof, is playing against the US investor. Prices in Miami are actually beginning to recover, especially in the condo market, thanks to foreign buyers, so much so that the foreigners are beating out the Americans.

I remember all the rage a long time ago when the Japanese were buying up commercial real estate in New York City. Everyone was so appalled. Not so much now, even up in Lake Mohawk, NJ...'It isn’t popular. It is unforeseen territory, and it’s unique. I think it’s a very smart choice. It’s not where everyone is looking,' says Spekhardt."

US economy "bumbling along"

The US economy is just "bumbling along" and creating an uncertainty among business that is likely to stifle hiring and growth, says investor Wilbur Ross, fund manager and head of W.L. Ross & Co. Ross blamed Washington policies for much of the
problems, from the lack of a housing recovery to the recent controversy in which the Obama administration is trying to block Boeing from building a plant in a right-to-work state. "It's not going to be a 'W' or a 'V' or an 'L' (recovery) or another
alphabet letter," said Ross. "It's going continue to be punctuation—dots, dashes, question marks, exclamation points,one strong month, one weak month—a very fragile economy."

That lack of direction could stand in the way of businesses that want to expand. "This kind of thing is bad because it's unsettling to companies," he said. "Business has a terrible time adjusting to uncertainty. Good news they can adjust to, bad news
they can adjust to. Uncertainty makes it very, very hard to make long-term commitments." Businesses also are facing weak consumer spending. Unemployment remains mired at 9.1 percent while housing prices recently have double dipped despite aggressive efforts in Washington to stem the crisis. "The consumer still hasn't been
rehabilitated," Ross said. "All the meddling in the real estate side of life has not fixed residential real estate. If anything I think it's made it worse because it's extending out the foreclosure time lines and putting more uncertainty and more
downward pressure."

Ross also wondered about the state of job creation considering the battle the National Labor Relations Board has waged against Boeing. The agency contends that Boeing broke the law when it moved a plant to South Carolina, where workers are not required
to belong to a union. Boeing contends that even though it has a unionized work force it also can build plants in right-to-work states. Some in Congress have called on cutting funding to the NLRB on ground that the agency has overstepped its authority.
For Ross, the issue comes down to the kind of message the administration is sending at a time when job creation is at a premium. "Who in American business is going to have confidence to build a new factory, add employees, if you're not even sure
you can build the factory where you want to?" he said. "You can't have social experimenting interfering with turning the economy around. And I think that's what's going on here. It's social experimenting instead of building the economy."

Fannie Freddie are better, but still cash drains

Conservatorship has been good for Fannie Mae and Freddie Mac, but
the companies continue to drain federal resources away from other
government operations, according to the regulator of the mortgage
giants. In its third annual letter to Congress, the Federal
Housing Finance Agency (FHFA ) said stronger loan underwriting
standards enabled the companies to narrow losses in 2010 to $28
billion from $93.6 billion a year earlier. The companies have
received more than $160 billion funding from the Treasury
Department the past few years. "Since being placed under
conservatorship in 2008, Fannie Mae and Freddie Mac remain
critical supervisory concerns," said Edward DeMarco, acting
director of the FHFA. This is a "result of continuing credit
losses in 2010 from loans originated during 2005 through 2007 as
well as forecasted losses from loans originated during that
time." Still, DeMarco said governmental control allowed the
companies to "accomplish their statutory mission of facilitating
stability and liquidity for single-family and multifamily housing
finance."

The FHFA said Fannie and Freddie remain plagued by "credit risk,
operational risk, modeling risks and retention of qualified
leadership and personnel." The companies hold a 60% share of
single-family loan production. As conservator, the FHFA is
tasked with minimizing credit losses at the GSEs, and DeMarco
said more stringent underwriting standards and a stronger price
structure have helped. "Although past business decisions leading
to these losses cannot be undone, each enterprise, under the
oversight and guidance of FHFA as conservator and regulator, has
improved underwriting standards for loan purchases in the past
two years.," he said. "Another way FHFA minimized losses was to
require the enterprises to enforce existing contractual
representation and warranty loan repurchase agreements with
lenders." The FHFA also oversees the dozen Federal Home Loan
Banks and said all 12 reported profits in 2010. Loans to the
banks dropped to $479 billion last year from $631 billion at the
end 2009. The regulator said the banks' financial condition and
performance stabilized in 2010, but several continue "to be
negatively affected by their exposure to private-label
mortgage-backed securities."

Hacker claims BOA hid mortgage errors

A hacker organization known as Anonymous released on Monday a series of e-mails by a former Bank of America (BOA) employee who claims they show how a division of the bank hid foreclosure information. The bank unit, Balboa Insurance, which deals in force-placed coverage, was acquired by BOA when it bought the mortgage lender Countrywide in 2008, and the e-mail messages involve removing information linking loans to certain documentation. The e-mails dating from November last year reveal a correspondence among Balboa employees in which they move to hide the record of certain documents "that went out in error." The documents were tied to loans by GMAC, a BOA client, according to the e-mails. "The following GMAC DTN's need to have the images removed from Tracksource/Rembrandt," an operations team manager at Balboa wrote. DTN refers to document-tracking number, and Tracksource/Rembrandt is an insurance-tracking system.

The response he receives: "I have spoken to my developer and she stated that we cannot remove the DTN's from Rembrandt, but she can remove the loan numbers, so the documents will not show as matched to those loans." Removing the loan numbers from the documents, according to the e-mails, was approved. A member of Anonymous said in an interview Monday that the purpose of his Web site was to bring attention to the wrongdoing of the banks. "The way the system is, it's made to cheat the average person," he said. A BOA spokesman told Reuters on Sunday that the documents had been stolen by a former Balboa employee, and were not tied to foreclosures. "We are confident that his extravagant assertions are untrue," he told the news service.

MBA - foreclosures up delinquencies down

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 8.22% of all loans outstanding as of the end of the fourth quarter of 2010, a decrease of 91 basis points from the third quarter of 2010, and a decrease of 125 basis points from one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 46 basis points to 8.93% this quarter from 9.39% last quarter. The percentage of loans on which foreclosure actions were started during the fourth quarter was 1.27%, down seven basis points from last quarter and up seven basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.

The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.63%, up 24 basis points from the third quarter of 2010 and up five basis points from one year ago. The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 8.57%, a decrease of 13 basis points from last quarter, and a decrease of 110 basis points from the fourth quarter of last year. The combined percentage of loans in foreclosure or at least one payment past due was 13.56% on a non-seasonally adjusted basis, a 22 basis point decline from 13.78% last quarter.

Jay Brinkmann, MBA's chief economist said "These latest delinquency numbers represent significant, across the board decreases in mortgage delinquency rates in the US. Total delinquencies, which exclude loans in the process of foreclosure, are now at their lowest level since the end of 2008. Mortgages only one payment past due are now at the lowest level since the end of 2007, the very beginning of the recession. Perhaps most importantly, loans three payments (90 days) or more past due have fallen from an all-time high delinquency rate of 5.02% at the end of the first quarter of 2010 to 3.63% at the end of the fourth quarter of 2010, a drop of 139 basis points or almost 28% over the course of the year. Every state but two saw a drop in the 90-plus day delinquency rate and the two increases were negligible."

"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner. Despite continued high levels of unemployment, the economy did add over 1.2 million private sector jobs during 2010 and, after remaining stubbornly high during the first half of 2010, first time claims for unemployment insurance fell during the second half of the year. Absent a significant economic reversal, the delinquency picture should continue to improve during 2011, Brinkmann said.

Mike Fratantoni, MBA's vice president for single family research said "While the foreclosure starts rate fell during the fourth quarter, the percentage of loans in foreclosure rose to equal the all-time high. The foreclosure inventory rate captures loans from the point of the foreclosure referral to exit from the foreclosure process, either through a cure (perhaps through a modification), a short sale or deed in lieu, or through a foreclosure sale. As we predicted last quarter, the percentage of loans in the foreclosure process increased in the fourth quarter, largely due to the foreclosure paperwork issues that were being addressed in September and October. These issues caused a temporary halt in foreclosure sales, particularly in states with judicial foreclosure regimes, such as New Jersey, Florida, and Illinois.

With fewer loans exiting the foreclosure process through sales, the foreclosure inventory rate naturally increased, even as fewer foreclosure starts meant that fewer loans entered the foreclosure process in the fourth quarter." "The share of loans in foreclosure in California and Florida combined was 36.0%, a decrease from 37.3% in the third quarter, and 39.3% a year ago. Over 24% of the loans in Florida are one payment or more past due or in the process of foreclosure, the highest rate in the nation, followed by Nevada at over 22%, compared to an average of 13.6% for the nation. Only eleven states saw an increase in their foreclosure start rate with Maryland seeing the largest increase."