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Zombie Foreclosures Come Back to Bite Homeowners

“Borrowers are discovering that their foreclosed homes are coming back to haunt them — long after they have moved out.

In these so-called zombie foreclosures, borrowers move out of their homes after their bank schedules a foreclosure auction only to find out months or years later that the auction never took place or the bank never transferred the deed to the house. That means the borrower still technically owns the home, leaving them on the hook for property taxes, fees and for homeowners’ association dues.

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Mortgage Applications Fall Again Last Week


“NEW YORK (Reuters) – Applications for U.S. home mortgages fell for a second straight week as bothrefinancing and loan requests for new mortgages eased last week, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, was 1.7 percent lower in the week ended February 15.

The MBA’s seasonally adjusted index of refinancing applications fell 1.6 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, dropped 1.7 percent.

The refinance share of total mortgage activity fell to 77 percent of applications, the lowest level since May 2012, from 78 percent the week before.

Fixed 30-year mortgage rates averaged 3.78 percent in the week, up 3 basis points from 3.75 percent the week before.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.”

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China Orders Cities to Limit Home Purchases

“Chinese Premier Wen Jiabao called for local authorities to “decisively” curb real estate speculation and take steps to rein the property market after data showed prices surged the most in two years last month.

Cities that have witnessed “excessively fast” price gains should promptly impose home-purchase restrictions if they’ve not done so already, the central government said in a statement released after a meeting of the State Council headed by Wen. Provincial capitals and municipalities to report directly to the central government should also publish annual price control targets to keep new-home costs “basically stable,” according to the statement.

Shares of Chinese developers listed in Shanghai fell the most in more than six months yesterday on concerns the government would impose new measures to cool the real estate market. Home prices rose 1 percent last month from December, the most since January 2011, according to data from SouFun Holdings Ltd., the nation’s biggest property website.

China needs to maintain the “consistency and stability” in its property curbs because home supplies will remain tight in large cities as the nation’s urbanization accelerates, the government said in today’s statement….”

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Foreclosures in CA Hit a Seven Year Low

“For the first time since January 2007, California did not have the properties with the most foreclosure filings, according to RealtyTrac’s latest foreclosure report. 

California received a total of 18,093 foreclosure filings, and Florida had the most with 29,800. 

Moreover, California had 4,386 foreclosure starts – the pace at which mortgages enter the foreclosure process – in January, down 62 percent from last month, and 75 percent from a year ago, hitting a seven-year low. The decline was largely due to a fall in notices of default (NOD).

The huge improvement in the state’s foreclosure market has been attributed to the California Homeowner Bill of Rights which became a law on January 1, 2013….”

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Switzerland Warns of Property Bubble, Considering Further Curbs

“Switzerland’s central bank has a message for lenders: act now to stem surging credit growth or face further restrictions.

The government, at the urging of the Swiss National Bank, yesterday ordered banks to hold additional capital as a buffer against risks posed by the country’s biggest property boom in two decades. The amount, set at 1 percent of banks’ risk- weighted assets tied to domestic residential mortgages, can be increased to as high as 2.5 percent.

“The measure is a warning shot at banks that were overgenerous with their credit lending,” said Janwillem Acket, chief economist at Julius Baer Group Ltd. in Zurich. “The government and the SNB want to tell banks to be more restrictive or we’ll tighten the reins further.”

Governments from Singapore to Dubai are seeking measures to cool overheated property markets after central bankers lowered interest rates to stimulate their economies. While Swiss policy makers in July toughened rules on mortgage lending to avoid a repeat of a housing collapse that crippled the economy in the early 1990s, the SNB requested the buffer after “imbalances intensified further” in the second half.

The measure will be imposed on all Swiss banks as well as subsidiaries of foreign banks operating in the country. Lenders will have to add about 3 billion francs ($3.27 billion) to comply with the new rules, which will be enforced starting Sept. 30, according to the government. Policy makers will “continue to closely monitor developments” and “regularly reassess the need to adjust the level,” the SNB said.

Prices Surging…”

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Mortgage Applications Fall Last Week


“Applications for U.S. home mortgages fell last week, with purchase and refinance demand drying up as interest rates rose for the fourth week in a row, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, was down 6.4 percent in the week ended Jan 8….”

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Late Mortgage Payments Hits a Four Year Low

“Homeowners who took on mortgages well after the housing bubble burst are doing a better job in keeping up with payments, a trend that has helped push the national rate of late payments on home loans to the lowest level in four years.

The percentage of mortgage holders at least two months behind on their payments fell in the fourth quarter to 5.19 percent from 6.01 percent a year earlier, credit reporting agency TransUnion said Tuesday.

The rate hasn’t been that low since December 2008, a time when home prices were sliding, the U.S. economy was in recession and many adjustable-rate mortgages taken out by homebuyers with less-than-perfect credit were in the process of resetting to a higher rate.

Those ARM resets triggered higher payments that many borrowers couldn’t afford, sending late payment rates higher into 2009. In addition, the national unemployment rate was on an upward trajectory in 2008 that would extend well into the following year.

Those are some of the reasons the mortgage delinquency rate didn’t hit its peak of nearly 7 percent until the fourth quarter of 2009, according to TransUnion.

The rate has been trending down since then, aided by a rebound in home sales and rising home prices, which make it easier for borrowers to refinance their mortgages or sell their homes if they lose their jobs or otherwise become unable to make payments….”

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Subprime Mortgages Are Hot Again, Trouble Brewing ?

“The subprime market for risky mortgage backed securities is hot again and its revival is exceeding many people’s expectations, the chief market strategist at Rosenblatt Securities said. However, he expects it will end badly.

The subprime mortgage crisis, which led to the financial crash of 2008, involved institutions making loans to those with poor credit who later had difficulty maintaining their repayment schedule.

Wall Street brokerage firm Rosenblatt, which has been monitoring the situation since the last crisis, said the credit-led bull market is well under way.

“The subprime market’s revival is proving to be even stronger than we had anticipated,” Brian Reynolds said, in a research note. “This is just a credit cycle, and it will eventually end badly like the others.”

Rosenblatt Securities has been worried before. It showed outrage when General Motors bought AmeriCredit car loans firm in 2010. The deal repeated the excesses of the last credit cycle, it said at the time, when GM had to hive off its financial subsidiaries which then needed taxpayers’ money to survive.

(Read MoreBond Prices Rebound as Bargain Hunting Emerges)

And it has noticed another huge development this week. The Wall Street Journalreported that a joint venture between AIG and Fortress will be issuing a securitization of personal loans.

“The average coupon on some of these loans is 25 percent, as some of them have no collateral. The A-rated tranche is expected to yield a whopping (for this environment) 2.5 percent, and we’re pretty sure the enhanced cash and cash-plus pseudo-money market funds will gobble this up.”

This search for yield has angered Reynolds, who thought he would never see subprime personal loans again. He said the situation was now reminiscent of the structured finance boom that began in 1994.

“We’re tempted to go check the attic to see if we have some old Beanie Babies that we could securitize,” he said….”

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New and Existing Home sale Prices Reach Their Widest Spread in Quite Some Time

“A report this week from Barclays downgrading the stocks of several of the nation’s largest public home builders drew quick contest from the National Association of Home Builders, but not for the main premise. The Barclays report centered largely on, “stretched” stock valuations, but it also cited a secondary concern about new home prices.

“New home prices have dramatically outpaced existing home prices, and the reason for that is because you have a very constructed mortgage market today. The only people who can buy are people who are very well off, so that’s created a positive mix shift,” noted Barclay’s analyst Stephen Kim in an interview on CNBC’s “Street Signs.” …”

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Even With a Rate Hike Mortgages Rose Last Week


“Applications for U.S. home mortgages rose last week even as interest rates climbed, while refinancing demand accounted for a slightly smaller proportion of total activity, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 3.4 percent in the week ended Feb. 1.

The MBA’s seasonally adjusted index of refinancing applications rose 3.5 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, rose 2.2 percent….”

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CoreLogic Says Home Price Rose 8.3% in December, 2012 Best in 6.5 Years


“WASHINGTON (AP) — U.S. home prices jumped by the most in 6 ½ years in December, spurred by a low supply of available homes and rising demand.

CoreLogic, a real estate data provider, says home prices rose 8.3 percent in December compared with a year earlier. That is the biggest annual gain since May 2006. Prices rose last year in 46 of 50 states.

Home prices also rose 0.4 percent in December from the previous month. That’s a healthy increase given that sales usually slow over the winter months.

Steady increases in prices are helping fuel the housing recovery. They’re encouraging some people to sell homes and enticing some would-be buyers to purchase homes before prices rise further.

Higher prices can also make homeowners feel wealthier. That can encourage more consumer spending.”

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Should You Get Back Into Real Estate?

“Mark R. Crovelli writes: As a graduate student and construction worker in San Diego from 2003-2005, I was afforded an up-close view of the inflation of the last real estate bubble. It was a truly exciting time to work in the building industry in Southern California because there was so much money sloshing around. I literally couldn’t even walk into Home Depot without being accosted by hordes of greedy homeowners and slippery contractors offering to pay cash to anyone willing to do construction work.

Everyone I knew was making piles of easy money buying and flipping homes, and I often heard that I was just plain stupid to not be buying and flipping some of my own. I was content to just be able to finance graduate school without debt, however. I decided to move back to Colorado to finish graduate school at almost precisely the moment that my friends started making really big money in real estate. They all thought that I was insanely stupid to leave.

A year later, I wrote an article predicting the collapse of the real estate bubble. A year after that, my friends in Southern California started losing their jobs, and a year after that many of my old friends started losing big money. My decision to avoid real estate investment looked a lot less stupid at that point.

Only six years have passed since the largest housing bubble in world history imploded, and I am once again receiving investment advice from my friends involving real estate. Instead of buying and flipping homes, they are now promising me piles of easy money if I purchase “investment homes” to rent out. My friends are not quite as exuberant as Californians were in 2006, but the pitch of their excitement is definitely rising.

I am not sold on the idea at all, however. In fact, I think my friends who are piling into “investment properties” right now are setting themselves up for losses on a scale only surpassed by the losses suffered in the last real estate crash. Real estate is still extremely dangerous, and only people with a solid financial cushion and who are willing to take gargantuan risk should be moving into it.


In order to see why this is the case, first consider the role of property taxes in real estate investment. Quite obviously, the higher the rate at which a property is taxed, ceteris paribus, the lower the value of that piece of property. This much is obvious. But what most real estate investors do not consider at all is the fact that property taxes can change. The fact that taxes have been X amount for the past ten or twenty years is completely irrelevant if a government decides to raise or lower the rate at which it taxes property.

Given this, the important consideration from an investment standpoint is the rate at which real estate will be taxed in the future. In order to make an informed guess about future property taxes, however, the investor must attempt to forecast the financial condition of the government that taxes the real estate in any given area. Governments facing serious financial difficulty in the future should be expected to try to gouge property owners to make up for budget and pension shortfalls.

The problem is, however, that it is almost impossible to figure out the financial health of any given municipality. The municipal bond market, which is a decent proxy measure of municipal financial health, is one of the most opaque, illiquid and misleading markets out there. Even the incompetent SEC admits this, by the way. Not only that, but many municipalities that are seemingly healthy, and which are still able to borrow massive amounts of money at low rates today, are completely bankrupt from a long term perspective. Many school districts in California, for example, have been engaging in myopic borrowing schemes that basically ensure their future insolvency. More accurately, these municipalities will assuredly be bankrupt in the future if they don’t raise property taxes dramatically.

To think that these bankrupt municipal governments and the hoards of government workers and pensioners they parasitically support are going to just file for bankruptcy and lay off massive numbers of teachers, police officers and firemen is just plain silly. Of course they are going to try to pry as much money out of their tax bases as they can. If you are a property owner that means you, and your property taxes are going up – potentially substantially – at some point in the future.

If you think this is merely idle speculation…”

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Pending Home Sales Fall on Smaller Supply

“Signed contracts to buy existing homes fell 4.3 percent in December from the previous month, according to a monthly index from the National Association of Realtors. That missed analysts’ expectations of a one percent gain. The index is 6.9 percent higher than December of 2011. Realtors say it is not lack of demand but supply at the end of 2012 that pushed the numbers down.

“Buyer interest remains solid, as evidenced by a separate Realtor survey which shows that buyer foot traffic is easily outpacing seller traffic,” wrote Lawrence Yun, chief economist for the NAR in a release.

(Read More: New Housing Fears: Home Prices Rising Too Fast?)

Much of last year’s gains in existing home sales was driven by investor demand for foreclosures and other distressed properties. Millions of dollars, largely in cash, from private equity, flowed into the market, pushing supplies down dramatically and even causing bidding wars in some of the previously hardest hit markets. That pushed prices up in the double-digit range, but critics caution that this is not a real organic recovery in the overall market. These existing sales numbers as well as a disappointing read last week on sales of newly built homes are bolstering that warning.

The Realtors’ monthly index fell 5.4 percent in the Northeast month-to-month, rose 0.9 percent in the Midwest, fell 4.5 percent in the South and fell 8.2 percent in the West. The West, and its severely distressed markets like Phoenix and Las Vegas, has been the center of most investor interest and is therefore seeing the lowest supply of properties for sale. The West is also the only region that saw a year-over-year decline in signed sales contracts in December….”

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Shiller Says Don’t Get So Excited Yet Over Housing

Yale professor Robert Shiller is one of the pre-eminent experts in house prices.

Shiller created the “Case-Shiller Index,” which tracks changes in house prices on a monthly basis and is the most closely followed house-price index in the country.

We sat down with Professor Shiller in Davos to get his take on the future of the housing market.

* * *

Henry Blodget: Everybody in the U.S. seems convinced that the housing market is going to come roaring back, it’s going to save the economy, house prices are going to rise, houses are a great investment again. Are they right?

Professor Shiller: First of all, I challenge your statement a little bit. The Pulsenomics survey of experts – they had 105 experts in their December survey – and not one of them predicted a return to the boom that we had. The most optimistic had a real return for the next 4/5 years of something like 6 percent.

Blodget: But that’s way better than zero.

Shiller: I’m taking the most optimistic out of 105….”

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Dwindling Inventory Helps to Boost Home Prices by 0.6% in October, 5.6% for 12 Months Through 11/2012

“U.S. home prices climbed 5.6 percent in the 12 months through November as buyers competed for a dwindling inventory of properties, according to the Federal Housing Finance Agency.

Prices rose 0.6 percent from October on a seasonally adjusted basis, the FHFA said today in a report from Washington. The average estimate of 15 economists in a Bloomberg survey was for a 0.7 percent advance….”

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Mortgage Applications Rise 7%

“The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications this morning, noting a rise of 7% in the group’s seasonally adjusted composite index, following a rise of 15.2% for the previous week.

The seasonally adjusted purchase applications index rose by 3% from the previous report. On an unadjusted basis, the composite index rose 9% week-over-week. Year-over-year the unadjusted purchase index is up 26%.

Though this week’s increases are smaller than last week’s, the upward trend continues. The historically low interest rates certainly have a lot to do with that, especially for folks looking to refinance existing mortgages. Applications for refinancing remained flat at 82% (seasonally adjusted)….”

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Maryland Bill Would Protect Homeowners From Investors Buying Debt

“Maryland lawmakers are sponsoring legislation to prevent Baltimore-area residents from losing their homes for failing to pay small municipal water bills —a stunning scenario detailed in a Center for Public Integrity story.

The legislation is aimed at preventing a repeat of what happened to Vicki Valentine, a Baltimore woman who lost her family’s mortgage-free home over what began as an unpaid water bill of $362. The Center told Valentine’s story in 2010 as part of an investigation into the impact of tax-lien sales on struggling property owners.

Counties in Maryland, like many other states, sell investors the right to collect unpaid property taxes and other municipal debts of $250 or more at auctions, which often are conducted online and can draw investors from all over the world. The law in Maryland allows lien holders to charge double-digit interest rates and in some cases tack on thousands of dollars in fees. Homeowners who fail to pay may face foreclosure on their property.

But the new bill introduced earlier this week in the Maryland General Assembly would prohibit tax collectors in the City of Baltimore and suburban Baltimore County from including residential property in the tax sale when the lien “arises solely from any unpaid water, sewer and other sanitary system  charges” and is less than $750 in total.

“We’re one of the few jurisdictions in the United States of America that thinks an equitable solution to not paying water bills it to take your house,” said State Sen. James Brochin, D-Baltimore County, the measure’s chief sponsor. “It’s predatory and bizarre….”

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