“Everybody is like a magnet. You attract to yourself reflections of that which you are. If you’re friendly, then everybody else seems to be friendly too.” — Dr. David Hawkins: Physician, spiritual teacher, and lecturer
Homeowner and rental vacancy statistics, from the Current Population Survey via the Census Bureau, provide an interesting set of numbers indicative of the rent versus buy question. There are roughly 131 million housing units in the United States, with about 86% of them being occupied. Of those units, 57% are occupied by owners, 29% by renters, and 14% (about 18 million units!) are vacant.
Will they be filled with buyers? A top retail branch manager says, “We still have agents waiting for the great pumpkin.” Other managers had written to me last autumn saying, “If my agents can’t produce loans when rates are at 4%, I don’t know what makes them think they’re going to be doing any more when rates go back to 5 or 5.5%.” Well, here we are. We did see a jump in mortgage applications last week, up about 13% on an adjusted basis, with refinancing activity accounting for about 66% of total apps.
This leads to a discussion about overall trends in the mortgage biz. Last quarter Freddie Mac reported that 46% of refinance volume was “cash-in” where the principal mortgage balance is lowered as a result of homeowners paying-in additional money. Many households, like companies, are relatively liquid, and are deciding what to do with the money – and buying down debt during periods of low rates is a good option. (Companies face a slightly different set of options, including paying a dividend, buying another company, expanding existing facilities, etc.)
Yesterday we learned that the S&P/Case Shiller Home Price Indices, which track home prices throughout the U.S. on a two-month lag, declined 3.9% during the fourth quarter of 2010 on top of a 1.9 percent decline in Q3. Prices were 4.1% lower than one year earlier. “Despite improvements in the overall economy, housing continues to drift lower and weaker,” was a quote that I saw.
But the focus was on other items, namely a decent 2-yr Treasury auction and the violence and protests in Libya. MBS prices finished the day better by .375-.5 on roughly average volume, and 10-yr T-notes improved by about 1 point and moved down to a yield of 3.46%.
This morning we already had the usual MBA weekly Mortgage Application Survey (mentioned above) and later we’ll have Existing Home Sales for January along with the second leg of the Treasury’s latest auctions with $35 billion 5-year notes going off at 1PM EST. We find the 10-yr up to about 3.49% and MBS prices worse by about .125.
FROM RPM MORTGAGE – REGARDING ADMINISTRATION’S PLAN ON US HOUSING REFORM
On February 11, 2011, the Obama Administration delivered a report to Congress detailing the Administration’s plan for reforming the U.S. housing finance market. The Administration’s plan is intended to wind down the housing GSEs Fannie Mae and Freddie Mac and shrink the government’s current footprint in housing finance.
The Administration’s report details the following plan:
1. Wind Down Fannie Mae and Freddie Mac and Help Bring Private Capital Back to the Market
· Phasing in Increased Pricing at Fannie Mae and Freddie Mac to Make Room for Private Capital, Level the Playing Field
· Reducing Conforming Loan Limits (Set to Reset on October 1, 2011) to Levels Set in HERA
· Phasing in 10 Percent Down Payment Requirement
· Winding Down Fannie Mae and Freddie Mac’s Investment Portfolios at an Annual Rate of No Less than 10 Percent Per Year
· Returning Federal Housing Administration (FHA) to its Traditional Role
2. Fix Fundamental Flaws in the Mortgage Market
· Helping Consumers Avoid Unfair Practices and Make Informed Decisions About Mortgages
· Increasing Accountability and Transparency in the Securitization Process
· Creating a More Stable Mortgage Market
· Servicing and Foreclosure Processes, Including Establishing National Standards for Mortgage Servicing, Reforming Servicing Compensation, and Focusing on Treatment of Lien Priority
· Forming a New Task Force on Coordinating and Consolidating Existing Housing Finance Agencies
3. Better Target the Government’s Support for Affordable Housing
· Reforming and Strengthening the FHA
· Rebalancing our Housing policy and Strengthening Support for Affordable Rental Housing
· Ensuring that Capital is Available to Credit-worthy Borrowers in All Communities, Including Rural Areas, Economically Distressed Regions, and Low-income Communities
· Supporting a Dedicated Funding Source for Targeted Access and Affordability Initiatives
4. Longer-Term Reform Choices
· Option 1: Privatized System of Housing Finance with the Government Insurance Role Limited to FHA, USDA and Department of Veterans’ Affairs’ Assistance for Narrowly Targeted Groups of Borrowers
· Option 2: Privatized System of Housing Finance with Assistance from FHA, USDA and Department of Veterans’ Affairs for Narrowly Targeted Groups of Borrowers and a Guarantee Mechanism to Scale Up During Times of Crisis
· Option 3: Privatized System of Housing Finance with FHA, USDA and Department of Veterans’ Affairs Assistance for Low- and Moderate-Income Borrowers and Catastrophic Reinsurance Behind Significant Private Capital
· There seems to be little chance of any reform legislation passing between the next 12-24 months
· Very little social policy discussion in the report
· Limited discussion on FHLB and FHA
· No tangible information included about second liens
· Positive to see that the Administration believes securitization is necessary to go forward
· Left room in the short term to curb GSE market share
· Higher loan limit will fall from 729 to 625
· 10% reduction in loan portfolios per year
· FHLB to be left in place – limited by smaller portfolios and greater oversight
· Mortgage prices will rise
· FHA 25 basis point increase
· Risk retention rule finalized this year and enacted in 2012
MERS: A MESS We Should Know About
The greatest hurdle standing in the way of a complete housing recovery is the backlog of distressed properties that must be liquidated. The banks must release these properties to the market in a controlled fashion. If released too quickly, they will crush house values. If released too slowly, the recovery will be further delayed. However, the control of the flow may no longer be in the hands of the banks. The issue is rather complicated. It starts with the formation of Mortgage Electronic Registration Systems (MERS).
What is MERS?
According to a white paper by the National Association of Independent Land Title Association (NAILTA):
MERS is a creation of some of the most powerful forces in the real estate and mortgage banking industries. In the mid-1990’s mortgage bankers decided they no longer wanted to pay recording fees for assigning mortgages between institutions. This decision was driven by securitization – a process of pooling many mortgages into a trust and selling income from the trust to investors on Wall Street…To avoid paying county recording fees each time the mortgages were assigned, mortgage bankers and the title insurance industry formed a plan to create one shell company that would pretend to own all the mortgages in the country. By doing so, the mortgage bankers would never have to record assignments since the same company would always “own” all the mortgages. The company they created is now known as Mortgage Electronic Registration Systems, Inc. or MERS.
Why will this create a challenge with foreclosures?
We go back to the NAILTA report:
If MERS is just an agent or nominee, there are state land title recording acts that prevent shell companies, nominees or other forms of agents from holding title to real estate. Thus, however MERS “holds” a mortgage, the construction is, at best, problematic. Again, if it cannot hold title as a nominee, MERS and its lender assignees cannot enforce the mortgage.
A system designed to simplify a process might have instead complicated it further. Now the courts are uncertain as to whether or not they will recognize MERS as having the right to foreclose on said mortgages. Some have allowed it; some have not.
Can the courts actually prevent MERS from foreclosing on mortgages?
DSNews reported on one such case:
A New York judge has ruled that Mortgage Electronic Registration Systems, Inc. (MERS) does not have the right to transfer mortgages on behalf of its members, meaning it does not have the right to file foreclosures on behalf of lenders.
The company has recently been under fire for the practice, but the company defended its actions saying that borrowers are required to sign documents stating that MERS can assume rights and responsibilities on behalf of creditors…
But Judge Robert Grossman ruled MERS does not have the authority to act on behalf of its members, and the actions of the company are actually illegal, no matter what papers MERS requires members sign. In his statement, Judge Grossman said:
“The court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its members/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States.”
How many mortgages are we talking about?
MERS currently is involved in almost half the mortgages in America. Can the courts stop foreclosures on all these mortgages? Judge Grossman addressed this exact point:
“The court must resolve the instant matter by applying the laws as they exist today. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”
How has MERS reacted to this ruling?
MERS, in an announcement on their website dated 2/16/2011, alerted their clients to not foreclose in their name for the next 90 days:
MERS is providing the following guidance to all Members to strengthen business practices, and minimize reputation, legal and compliance risk to MERS and its Members. In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties’ right to foreclose. MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges…
MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name…
We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.
This definitely will again slow down the banks’ ability to bring foreclosures to market. That will be good news for home prices in the short term. It will also delay the recovery of the housing market.
It seems there will be further delays on many foreclosures. That gives sellers a window of opportunity to sell their home before many of these discounted, distressed properties come to market as competition.
Build a better browser for your real estate business
There has been a huge shift from the desktop to the browser over the last few years. Real estate agents spend a tremendous amount of time working in the browser space, utilizing multiple listing service, e-mail, social media and other Web apps.
Here is a fun break down on some of the coolest browser extensions and add-ons that could be useful to the real estate industry.
Showcasing three add-ons from the top four browsers: Internet Explorer, Firefox, Chrome and Safari.
Whether you are a Mac or PC user, there are plenty of add-ons for your browser of choice. Internet Explorer offers three types of add-ons:
1. Accelerator: allows a user to utilize an online service when selecting text on a Web page. For example, highlighting a property address on a details page could launch a service such as Google Maps to access the location and directions.
2. Toolbar: a third-party app that is added to your browser’s graphical user interface (GUI) as a plug-in.
3. Web Slice: introduced in Internet Explorer 8, Web Slice is a feed technology that allows users to “keep up with updated sites directly from the favorites bar,” according to an online description. Internet Explorer is the only browser to support a Web slice natively.
Let’s take a look at some add-ons and extensions.
WiseStamp: I love this add-on and have been using it for quite some time. The WiseStamp app allows you to enhance and customize your e-mail signature by including your social media profiles. You can also include dynamic content, such as news headlines or tweets, which is an excellent way to engage clients. The signatures are clean and lightweight.
TinyURL Generator and Bit.ly: Looking to generate short, clean URLs for Twitter, chatting or QR (quick response) codes for “just listed” cards? Both TinyURL Generator and Bit.ly offer Firefox add-ons to help avoid URL clutter.
Delicious: It’s been quite the saga for the popular social bookmarking service. Back in December, when rumors surfaced that Yahoo was planning on “sunsetting” the site, many users — including myself — began scrambling for alternative services. Despite the announcement that the service would not be shut down, many migrated to applications such as Diigo and Google Bookmarks. Until then, I never realized just how important bookmarking was to my workflow. Although the future of Delicious is still unknown, it is an essential add-on.
Browse all Firefox add-ons.
TabJump: Chrome certainly offers some fantastic extensions, and TabJump just might be my favorite. “TabJump highlights frequently used tabs and related tabs so you can easily jump between them,” according to an online description. The best feature, hands down, is the ability to relaunch closed tabs.
Turn Off the Lights: I ranked video fourth in my “Top 10 tech trends of 2010,” and it may rank higher in 2011. With so many cool video services available on the Web, “Turn Off the Lights” is a nifty little tool that fades the entire Web page to dark to enhance the viewing experience.
Evernote: This add-on “makes it easy to remember and find all of the great stuff you see online. Save full pages, including text, links and images with a single click,” according to an online description. Evernote works extremely well and syncs from your browser to multiple devices, including smart phones and tablets.
Browse Chrome extensions.
Google Maps (Accelerator): Mapping is an essential tool in real estate and Google Maps is a valuable Accelerator add-on. Just select an address on a Web page and click the Accelerator icon to launch Google Maps. It’s a super quick way to obtain a location or driving directions.
Find on LinkedIn (Accelerator): In “Use LinkedIn for offline networking,”,” Inman News columnist Gahlord Dewald wrote, “LinkedIn sometimes feels like the forgotten stepchild of social media,” and noted how LinkedIn can be a powerful business tool. Find on LinkedIn is an extremely handy Accelerator tool. Just highlight a person’s name and click the Accelerator icon. You can quickly find the person on LinkedIn. IE users should definitely give this one a try.
StumbleUpon (Toolbar): StumbleUpon is a “discovery engine” that helps people find and share websites. It utilizes a rating system for content. I’m typically not a huge fan of Toolbars, but with over 8 million users, StumbleUpon is a resourceful add-on. Enter real estate-related keywords as a topic to StumbleUpon.
Browse Internet Explorer add-ons.
Twitter: The Twitter extension for Safari is an official release that integrates a ton of features, including search, trends and related tweets. The integration is seamless and, once authenticated, you can even tweet the page that you are viewing with a short URL included.
Bing: The Bing Safari extension functions similarly as the Google Maps Accelerator for Internet Explorer. It’s super easy to use: just highlight text on a Web page and get instant maps, translations, flight status, and more.
Amazon Wish List: The Amazon Wish List extension is quick and easy to use. Just “add any item from any website to your wish list with one simple click,” as the description states. I just recently installed the extension for Safari, and it works pretty well.
Browse the Safari Extensions Gallery.
Many add-ons and extensions support multiple platforms and browsers. Feel free to experiment with a few. I have discovered a few gems that you may not be able to live without. Have Fun!
Real Estate: Like a Phoenix Rising from the Ashes
The real estate market has experienced difficulty over the last five years. From 2000-2006, house values climbed to unsustainable heights. Since then, we have seen much of this appreciation disappear. Now many look at the housing market as dead and lying in the ashes of its previous glory. However, there is growing evidence that, just like the Phoenix, there is a new market currently rising from those ashes.
Buyer activity is increasing
The first sign of an improving market is buyers again beginning to shop for a home for themselves and their family. That is taking place right now.
Pete Flint, CEO of Trulia said in a recent press release:
“We’re seeing a national resurgence of buyer and seller activity on Trulia.com. In January alone, we experienced an unprecedented level of site traffic including 11 million unique visitors – which is more than 70 percent year-over-year growth… (We) are now experiencing 100,000 property views per minute.”
The latest Credit Suisse Monthly Survey of Real Estate Agents reports:
Our Monthly Survey of Real Estate Agents pointed to another month of improved traffic – the third straight month, and the highest level for our traffic index since April 2010, the last month of the homebuyer tax credit. The improved economy and stronger consumer confidence has translated into an increase in homebuyer traffic.
But have they actually started purchasing?
The best news is that buyers are not just looking. The latest National Association of Realtors’ (NAR) Pending Sales Report, which quantifies the number of homes going into contract, shows continued improvement:
Pending home sales improved further in December, marking the fifth gain in the past six months.
Buyers are back out looking at homes and the number that are actually purchasing is steadily increasing. It appears the housing market is on the verge of a rebirth. The Phoenix is beginning to flap its wings.