8 Bills to Chip Away at Fannie, Freddie
House Republicans plan to introduce eight bills on Tuesday in what some are calling a “bite-sized approach” to phasing out government-sponsored enterprises Fannie Mae and Freddie Mac, the Associated Press reports.

Fannie and Freddie, along with other federal agencies, have backed about 9 in 10 new mortgages over the past year. The federal takeover of the GSEs in 2008 following the housing market collapse has cost taxpayers $150 billion, which has prompted many in Congress and even the White House to call for the GSEs to be phased out gradually over a five-year timeline.

Earlier this month, Rep. Jeb Hensarling, R-Texas, a member of the House GOP leadership, took the first shot by introducing a wide-ranging bill to end the government’s ownership of Fannie and Freddie in two years, either phasing them out completely or making them fully private companies within five years. However, experts say that the bill has little chance of surviving the Democratic-run Senate.

The eight smaller bills would include many of Hensarling’s proposals but by taking a “bite-sized approach” may have a better shot at weaving its way through Congress, aides and lobbyists told The Associated Press. The proposals are also expected to include a gradual increase in Fannie’s and Freddie’s fees as well as reduce the size of loans they’ll be able to back



California pending home sales, distressed sales rise in February

LOS ANGELES (March 21) – Pending home sales rose in February, as did the share of distressed properties sold, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. 

Pending home sales:

Pending home sales in California increased in February, according to C.A.R.’s Pending Home Sales Index (PHSI)*.  The index was 112.1 in February, rising 20.6 percent from January’s revised index of 93.0, based on contracts signed in February.  The index was down 1.6 percent from February 2010, when the presence of housing tax credits played a strong role in home sales.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

“The increase in pending sales is typical for this time of year, as we usually see a seasonal improvement in the spring,” said C.A.R. President Beth L. Peerce.

Distressed housing market data:

• The total share of all distressed property types sold statewide increased in February to 56 percent, up from 54 percent in January and up from 55 percent in February 2010.
• Non-distressed sales made up the remaining share at 44 percent in February, down from 46 percent in January and down from 45 percent in February 2010.
• Of the distressed properties sold statewide, the total share of REO (real estate-owned) sales was 33 percent in February, up from 32 percent in December, but was down from 36 percent in February 2010.
• The statewide share of short sales increased to 23 percent in February, up from 22 percent in January and up from 19 percent in February 2010.
• The median price of homes sold in the state differed dramatically depending on the property type, with non-distressed properties selling for much higher prices than short sales and foreclosures.
• The statewide median price of non-distressed properties sold in February was $370,000, $95,000 or 34.5 percent higher than the short sale median price of $275,000 recorded in February, and $170,100 or 85.1 percent higher than the February REO median price of $199,900.

Adjustable-Rate Mortgages Gain Steam Again
Shortly after the subprime mortgage crisis, adjustable-rate mortgages were often blamed for leading to soaring rates of loan defaults and home foreclosures — which ultimately caused many borrowers to shun them due to its higher risk than fixed-rate mortgages. Now more borrowers are revisiting ARMs.

ARMs, which have low initial interest rates that change over time, aren’t exactly the same as they were before the subprime crisis though. Lenders have introduced more conservative ARM products that no longer offer extra-low “teaser” rates that adjust every six months or “pick-a-pay” and “option” features that let borrowers pay less than the monthly interest that will give them with a bigger bill later on, The New York Times reports.

The ARMs most in demand are “5/1” and “7/1,” which have fixed interest rates for the first five or seven years and then adjust annually at a capped rate.

Bank of America has reported a higher interest in its ARM products, with nearly twice as many ARM transactions last month than last year. ARMs account for 10 percent of all of its mortgages, the bank reports.

Source: “More Borrowers Are Opting for Adjustable-Rate Mortgages,” The New York Times (March, 17, 2011)

Home prices drop in February
Following three months of sales gains, California home sales posted a weaker-than-expected performance and declined in February, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  The statewide median price of an existing, single-family detached home sold in California also declined in February.

MAKING SENSE OF THE STORY

• Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 497,660 in February, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. 
• February’s sales were down 9 percent from January’s revised pace of 547,080 units, and down 4 percent from the 518,390 sales pace recorded in February 2010.  The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the February pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.
• The median price of an existing, single-family detached home sold in California in February declined 2.8 percent to $271,320, from a revised $279,140 in January, and was down 2.5 percent from the $278,190 median price recorded for February 2010.  The February 2011 median price was the lowest since May 2009, when it was $263,440.
• “The market pulled back in February, following three months of sales gains, when the ramifications of the robo-signing delays from last fall pushed sales into the period from November of last year to January,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “February’s sales drop indicates the effects of the foreclosure freeze are diminishing, and the market is returning to a more moderate sales pace.”

More Banks Pay to Fix Up Foreclosures for Resale
More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures.

But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.

They hope to extend the foreclosed homes’ appeal past traditional investors and professional rehabbers. For example, home buyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.

The banks interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price.

Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to owner-occupant, agents may recommend fixes such as paint to $25,000 kitchen remodel.

Source: “Banks Fixing Up Foreclosures to Spur Sales; Strategy Aims to Give Them Broader Appeal, Reduce Big Inventory,” The Chicago Tribune (March 13, 2011)

Survey: Buyers, Sellers Optimistic About Housing
Nearly 70 percent of buyers and sellers say they believe the housing market and property values will recover in the next year or two, according to a new survey by Prudential Real Estate and Relocation Services Inc.

What’s more, 86 percent of the more than 1,000 buyers and sellers surveyed believe real estate is still a good investment despite the souring market conditions in many areas the past few years.

Those surveyed said they also are ready to buy: Six in 10 respondents say they are more interested in buying real estate and 59 percent say they are optimistic about buying now with recent momentum from the economic recovery. They also believe they can get a better deal now because of lower prices.

But many survey respondents said that buying a home relies on them being able to sell their existing home. About 67 percent respondent said they are concerned about getting a fair price for their existing home.

“This survey clearly demonstrates that Americans continue to be optimistic about the real estate market and believe that home prices will rise,” says James Mallozzi, chief executive officer of Prudential Real Estate and Relocation Services. “A key take away from the survey is although consumers recognize that it is a good time to buy, they are concerned about their ability to sell their homes. This is one of the reasons the market is still struggling to recover.”

Source: “Americans Confident in Recovery of Real Estate Market,” RISMedia (March 14, 2011)

Foreclosures Post Biggest Drop on Record
The number of foreclosure notices filed in February declined 14 percent compared with last month, and foreclosure notices dropped 27 percent compared to last year at this time. That marks the largest year-over-year decline that RealtyTrac, a foreclosure tracking site, has ever recorded.

The number of U.S. homes in some stage of foreclosure fell drastically last month, reaching a 36-month low, RealtyTrac reports.

Initial default notices, scheduled foreclosure auctions, and homes repossessed by lenders all dropped in February, RealtyTrac says.

“Allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets,” says RealtyTrac CEO James Saccacio. “The industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures.

Lenders repossessed 64,643 homes in February, a 17 percent drop from January.

Initial default notices dropped 16 percent from January — and 41 percent from a year ago. What’s more, foreclosure auctions dropped 10 percent from last month and 21 percent from February of last year, RealtyTrac said.

Rick Sharga, a senior vice president at RealtyTrac, says the real estate market isn’t out of the clear quite yet. He expects foreclosure activity to likely spike again as banks resolve foreclosure paperwork issues.

About 2 million households are in foreclosure proceedings. In addition, about 5 million borrowers are at least two months behind on their mortgage payments.

States With the Highest Foreclosure Rates

The states with the highest foreclosure rates for the month:

1. Nevada (which has held the No. 1 spot for 50 consecutive months, with one in every 119 households receiving a foreclosure notice)
2. Arizona (one in 222)
3. California (one in 239)
4. Utah
5. Idaho
6. Georgia
7. Michigan
8. Florida
9. Colorado
10. Hawaii

Source: “Foreclosures Plunge 27%-Biggest Drop on Record,” CNNMoney.com (March 10, 2011) and“Foreclosure Activity Slows Sharply in February,” Associated Press (March 10, 2011)

More Resources

LOS ANGELES (March – Fewer than three of five short sales close in California, illustrating the complexity and difficulty of navigating lenders’ and servicers’ short sale procedures, according to a Short Sale Lender Satisfaction Survey conducted by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  The survey gauges REALTORS®’ experience in working with short sale transactions – transactions in which the lender or lenders agree to accept less than the mortgage amount owed by the current homeowner.
 
“It’s disappointing that less than three in five short sales close, despite every effort by the REALTOR®, home seller and potential home buyer,” said C.A.R. President Beth L. Peerce.  “Many underwater homeowners who have been hit by the recent economic crisis can no longer afford to stay in their home and just need to sell their home as expeditiously as possible are unable to largely because of the complex and cumbersome short sale process,” she said.

Of the REALTORS® surveyed, 94 percent participated in a short sale transaction during 2010, demonstrating the surplus of short sale listings in today’s real estate environment.

The most frequent problems REALTORS® cited in working with lenders and servicers during the short sale process include unresponsiveness, onerous procedures, and long processing delays. 

Nearly three-fourths (70 percent) of REALTORS® said that closing their most recent short sale transaction with a lender or servicer was “difficult” or “extremely difficult,” while only 10 percent said it was “easy” or “extremely easy.”

“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” said Peerce.  “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds 6 months.”

More than half (63 percent) of REALTORS® said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted.  Only 4 percent said they received a written response in less than 14 days. 

Additionally, 44 percent of REALTORS® said that lenders took more than five business days to return any form of communication to REALTORS®.  Only 14 percent said lenders responded “within one business day.”

“The survey results show that the short sale system is clearly flawed and must be standardized and streamlined to reduce the inventory of foreclosures,” said Peerce.  “Increasing the number of successful short sale transactions is one important way we can help California families avoid foreclosure and move our economy closer to recovery,” she added.

Further illustrating faulty communication problems, 64 percent of REALTORS® were “not satisfied” or “not at all satisfied” with the timeliness of lenders’ response to their inquiries, while only 22 percent said they were “satisfied” or “extremely satisfied.” 

Moreover, nearly three-fourths (74 percent) of REALTORS® were “not satisfied” or “not at all satisfied” with the amount of time it took to hear whether a transaction was approved or disapproved, while 16 percent said they were “satisfied” or “extremely satisfied.”

In overall satisfaction with the lender they worked with, 67 percent of REALTORS® were “not satisfied” or “not at all satisfied,” while 19 percent were “satisfied” or “extremely satisfied.”

C.A.R.’s Short Sale Lender Satisfaction Survey was conducted during the last two weeks of December 2010 to gauge REALTORS®’ experience in working with lenders or servicers of short sales, bank-owned properties (REOs), and foreclosures.  The survey was delivered to 20,000 REALTORS®, with 2,150 responding to the survey.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Selective First-Time Buyers Can Miss Deals
Finding a “move-in ready” home was important to 87 percent of 300 first-time buyers recently polled by Coldwell Banker Real Estate. Some agents say first-timers are being more selective; and some are turning away from well-priced homes because they do not have granite countertops, they need a new carpet, or they have wall colors not to their liking.

Zillow says higher down payments and stricter underwriting standards mean today’s buyers want to ensure their homes need few and inexpensive improvements.

Agents believe HGTV and other cable channels have made buyers more knowledgeable about home design, but some worry that such programming also has given buyers unrealistic expectations.

“You can’t have the big yard, the top-line updates and all that in a starter home,” says Cindy Westfall of Lake Oswego, Ore.-based Prudential NW Properties. “You’ve got to compromise somewhere or else you’ll never buy anything.”

Source: “Picky First-Time Buyers May Lose Out on Great Deals,” Washington Post (March 5, 2011)