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FHA defaults rise

Defaults on Federal Housing Administration (FHA) mortgages
increased in December for the ninth-straight month. More than
711,000 FHA-backed home loans were in default at Dec. 31, nearly
19% higher a year earlier. As defaults increased, a constricted
and delayed foreclosure process is hurting the government's
ability to unload the properties once they are repossessed. The
US Housing and Urban Development Department (HUD) held 32,170 REO
in December, according to a recent report, the lowest level
measured since the same month in 2007. The high was reached in
March 2011 at 68,997 properties. The FHA insures roughly
one-third of the mortgage market, as private insurers have been
struggling with capital shortfalls since the crisis in 2007. But
the FHA is in trouble as well because of the surging defaults.
The capital ratio of the agency's mutual mortgage insurance fund
slipped to 0.24% last year, well below the 2% mandated by

Analysis from the White House's Office of Management and Budget
released this week showed the fund would actually fall into the
red this year and need an unprecedented bailout from the Treasury
Department. Bank of America will send roughly $500 million to
the FHA as part of a settlement reached last week over past
countrywide origination problems. HUD Secretary Shaun Donovan
said more settlements would be announced soon, sending between
$900 million and $1 billion to the FHA. The agency will also be
raising insurance premiums above the hikes set to take place in
2012 as a result of the payroll tax cut extension reached last
year. Donovan said this week that new loans written this year
and last are proving to be more profitable than expected. But the
market remains fragile and another downturn in housing could put
the fund in further trouble. "A very significant piece of what
determines the actuarial value of the fund is what we project to
happen to home prices," Donovan said. "The better than expected
performance of the new loans can be offset if home prices perform
worse than we expect."

Tax cut deal announced

A payroll tax cut for 160 million Americans, set to expire at the
end of this month, would be extended through December under a
bipartisan deal announced early today by US congressional
leaders. The accord would also renew expiring jobless benefits
for millions of others and prevent a pay cut for doctors of
elderly Medicare patients. Economists say the tax cut extension
and renewal of jobless benefits should provide a lift to the US
economy, certain to be a key issue in the battle for control of
Congress and the White House in the run-up to Election Day. "We
have reached an agreement and we're moving forward," Republican
Representative Dave Camp, who headed the negotiating committee,
told reporters shortly after midnight EST. It was not
immediately clear when the House of Representatives and Senate
would vote on the deal, but lawmakers hoped to do so before they
leave Friday for a week-long recess. Many Republicans had
initially balked at the extension while others insisted that its
cost had to be offset by spending cuts to prevent an increase in
the US deficit. House Speaker John Boehner and fellow Republican
leaders cleared the way for a deal on Monday when they dropped
their demand that there be spending reductions to pay for the
tax-cut extension.

Olick - foreclosures up again

"After a year-long reprieve from rising foreclosures, the numbers
are going up again. One in every 624 US households received a
foreclosure filing in January, up 3% from the previous month,
according to a new report from RealtyTrac. Foreclosure activity
froze in many states in 2011, due to processing delays after
fraud, or so-called 'Robo-signing,' were uncovered in the fall of
2010. The thaw is now on. 'We expect the pattern of increasing
foreclosures to continue in the coming months, especially given
the finalized mortgage and foreclosure settlement reached in
early February between 49 state attorneys general and five of the
nation's largest lenders,' said RealtyTrac's CEO Brandon Moore in
a written release. 'Foreclosure activity increased on a
year-over-year basis for the first time in more than 12 months in
Florida, Illinois, Indiana and Pennsylvania, following a pattern
we saw in late 2011 in states such as California, Arizona and

While states that do not require a judge to preside over
foreclosure proceedings, like California, saw a jump in filings
toward the end of last year, judicial states have all but
stalled. That will now change, thanks to the $26 billion dollar
government-lender/servicer settlement. There will still be some
delays on individual state levels, but the wheels are turning
again, and that means more bank repossessions and more foreclosed
properties heading to the re-sale market. Bank repossessions,
the final stage of the foreclosure process, increased at least
30% year-over-year in several states, including Massachusetts,
which saw a 75% spike. Bank-owned or REO (real estate owned)
activity hit a 16-month high in Illinois and a 15-month high in
Indiana. Default notices, the first stage of foreclosure, were
flat nationally in January, but spiked in judicial states, like
Connecticut and Pennsylvania (up 112%) and even in non-judicial
states like Maryland (up 100%).

Nevada still posted the highest foreclosure rate, with one in
every 198 households receiving a filing, despite an 8% drop in
foreclosure activity. Nevada is a non-judicial foreclosure state,
so the foreclosure backlog has been clearing for the last several
months. The situation is the same in California, where
foreclosure activity dropped to a 50-month low, but the state
still posted the second highest foreclosure rate in the nation.
More than 51,000 borrowers received a foreclosure filing in
January. California cities still account for nine of the top ten
metro foreclosure rates, according to RealtyTrac. As optimism
seems to abound for the spring, at least among the nation's home
builders whose sentiment index jumped to the highest level in
four years this month, foreclosures still stand in the way of a
robust recovery. Distressed property sales lower the value of
homes around them, and that pushes more borrowers into a negative
equity position, owing more on their mortgages than their homes
are currently valued. Until banks work through the enormous
backlog of foreclosures, which number in the millions, home
prices will not hit a firm bottom, especially in the most
troubled local real estate markets."

Jobless claims down

Jobless claims slipped 13,000 from an upwardly revised 361,000
the previous week and beneath economist estimates that actually
saw the number rising. The drop in jobless claims marked a near
four-year low, suggesting the labor market was finally
strengthening. Initial claims for state unemployment benefits
dropped 13,000 to a seasonally adjusted 348,000, the Labor
Department said, the lowest since March 2008. The prior week's
figure was revised up to 361,000 from the previously reported
358,000. Economists polled by Reuters had forecast claims rising
to 365,000. The four-week moving average for new claims, seen as
a better measure of labor market trends, fell 1,750 to 365,250
— the lowest since April 2008. Considerable slack still
remains, with 23.8 million Americans either out of work or
underemployed. There are no job openings for nearly three out of
every four unemployed. A Labor Department official said there
was nothing unusual in the state-level data and no state had been
estimated. The number of people still receiving benefits under
regular state programs after an initial week of aid tumbled
100,000 to 3.43 million in the week ended Feb. 4. That was the
lowest level since August 2008. Economists had forecast
so-called continuing claims falling to 3.50 million from a
previously reported 3.52 million. The number of Americans on
emergency unemployment benefits rose 16,568 to 3.00 million in
the week ended Jan. 28, the latest week for which data is
available. A total of 7.68 million people were claiming
unemployment benefits during that period under all programs, up
18,304 from the prior week.

Housing starts up

The Commerce Department said today that housing starts climbed
1.5% to an annual rate of 699,000 units. Initial estimates for
housing starts can be subject to large revisions and the
government revised the December reading significantly higher to a
689,000-unit rate. The Commerce Department initially estimated
groundbreaking in December advanced at a 657,000-unit rate.
Economists polled by Reuters had forecast housing starts rising
in January from the initial reading to a 675,000-unit pace.
Starts of multi-unit buildings, which are often rented, jumped
8.5% last month. New construction on buildings with five units or
more increased 14.4%. Groundbreaking on single-family units,
which make up a much larger portion of the sector, fell 1.0%.
Permits climbed 0.7% to an annual rate of 676,000 units.

Inflation up

US producer prices outside food and energy recorded their largest
increase in six months in January, but are unlikely to ignite
inflation pressures given the slack in the labor market. The
Labor Department said on Thursday its seasonally adjusted core
producer price index rose 0.4% last month, the largest gain since
July, after increasing 0.3% in December. Economists polled by
Reuters had expected core PPI to rise only 0.2%. In the 12 months
to January, core producer prices rose 3.0 after increasing 2.7%
in December. But overall prices received by farms, factories and
refineries edged up 0.1% after dipping 0.1% in December. The
rise, which was smaller economists' expectations for a 0.4% gain,
reflected declines in food and energy prices. In the 12 months
to January, producer prices increased 4.1%, moderating from 4.8%
December. That was the smallest increase in a year. The Federal
Reserve last month viewed inflation as largely contained and said
it expected to hold interest rates near zero at least through
late 2014. Wholesale prices outside of food and energy were
pushed up by a drugs costs, which accounted for about 40% of the
increase. Higher prices for light motor trucks and household
appliances also contributed. Passenger car prices fell 0.8%
after rising 0.5% in December.

Student loans drain retirement savings

Student loan debt amassed by parents is growing faster than loans
taken out by the student. Parents' loan debt has more than
doubled over the last decade — exceeding $100 billion dollars
or 10% of all outstanding student loan debt, according to the
independent research firm "Parents of every income
level are increasingly borrowing for their children's college
education. It doesn't matter whether the parents are low income,
middle income or upper income. There's been dramatic growth in
the percentages of parents who've been borrowing," says founder and publisher Mark Kantrowitz. Many parents
who co-signed loans or borrowed money on their own for their
children's education now face the loss of their retirement nest
eggs, homes and other assets. As student loan debt has topped US
credit card debt, "America faces the very real possibility of
another major threat on par with the devastating home mortgage
crisis," according to a new study by the National Association of
Consumer Bankruptcy Attorneys (NACBA).

Piling up student loans in middle age is "troublesome", says
NACBA vice president John Rao, an attorney with the National
Consumer Law Center. "Parents who take out loans for children or
co-sign loans will find those loans more difficult to pay as they
stop working and their incomes decline." But, parents' need to
borrow has grown as their savings has declined and plummeting
home values have made it difficult for many households to tap
what was once a common financial resource — the equity in their
homes. Parents have an average of about $34,000 in student loans
and that figure rises to $50,000, including interest, over a
standard 10-year loan repayment period. Interest rates on the
most common parental loan - the federal Parent "PLUS" loan - is
fixed at almost 8%. So the return on parents' investments needs
to average at least 8% just to break even. The fixed-rate PLUS
loan is often a better choice for families than private student
loans, whose rates may vary. But the need to borrow private or
PLUS is often a sign of over borrowing, Kantrowitz says.
"Parents should borrow no more than they can afford to pay in 10
years because they have to worry about their own retirement. By
the time they retire, they should have no debt remaining since
they will have no income to repay that debt."
Southern California - January sales up, prices down

Southern California home sales rose slightly last month as
investors snapped up the region's lowest-priced properties,
sinking prices to the lowest levels in more than 2 1/2 years,
DataQuick, a research firm, reported yesterday. More than half
of existing homes sold were foreclosed on in the previous year or
short sales -- transactions in which the price is less than what
is owed on the property. There were 14,523 new and existing
homes and condominiums sold in the six-county region in January,
up 0.4% from the same period last year, DataQuick said. Sales
plunged nearly 25% from December, reflecting a typical seasonal

Last month, 669 new homes sold, the lowest monthly tally since
DataQuick began tracking sales in 1988. The median price was
$260,000, down 3.7% from $270,000 the same period a year earlier
and from December. It was the lowest price since $249,000 in May
2009. During the current cycle, prices peaked at $505,000 in the
middle of 2007 and bottomed out at $247,000 in April 2009. John
Walsh, president of the San Diego-based research firm, said
January is typically a poor gauge of future sales but that the
mortgage market "remains dysfunctional." Nearly one-third of
homes sold last month were paid for fully in cash for a median
price of $199,000. Absentee buyers -- mostly investors and
second-home purchasers -- bought 26.8% of homes sold, paying a
median price of $193,500. Absentee buyers were especially active
in the Inland Empire, which has Southern California's
lowest-priced homes. Homes that sold for at least $500,000
accounted for 16% of sales, down from 18.3% a year earlier,
DataQuick said. During the last decade, a monthly average of
27.2% of homes sold for at least $500,000.

Home prices declined almost 5% in 2011

Home prices decreased 4.7% in 2011 compared to the year before,
marking the fifth consecutive year-end decrease in the CoreLogic
home price index. Excluding distressed sales, home prices
decreased 0.9% last year, which CoreLogic said gives an
indication “of the impact of distressed sales on home prices in
2011.” Home sales last year also show month-over-month
declines. December showed the fifth consecutive monthly decline
with a drop of 1.4%, but rose 0.2% when distressed sales were
removed from the equation.

The December decline followed a much larger drop of 4.3% in
November, compared to November 2010. “While overall prices
declined by almost 5% in 2011, nondistressed prices showed only a
small decrease. Until distressed sales in the market recede, we
will see continued downward pressure on prices,” said Mark
Fleming, chief economist for CoreLogic. While national
statistics may be bleak, a few states posted increases in the
price of homes last year. Montana came in first with 4.4%
appreciation with distressed sales included, followed by Vermont
(+4%), South Dakota (+3.1%), Nebraska (+2.5%) and New York
(+1.7%). Illinois had the biggest 2011 decline in prices, 11.3%,
followed by Nevada at 10.6%. Nevada's peak-to-current decrease
stands at 60% (including distressed homes), compared with a
national decrease of 33.7%.

Employment up

The pace of job creation surged in January, with the US economy
generating 243,000 new positions while the unemployment rate
dropped to 8.3%, according to government data released today.
Both numbers were far better than consensus, which expected a
growth of 150,000 jobs and a steady unemployment rate of 8.5%.
The overall work week remained unchanged at 34.5 hours while
wages rose an average of four cents an hour to $23.29. The
closely watched labor-force participation number, which can skew
the unemployment rate, fell to 63.7%, the lowest since May 1983.
The number of those working part-time for economic reasons rose
1.2%. Job gains have been concentrated primarily in the service
sector, particularly in retail and the food and beverage
industries. Warehousing, manufacturing, mining and health care
also have participated. True to form, services were responsible
for 162,000 of the January swell, with manufacturing payrolls
growing 50,000. Government cuts subtracted 14,000 from the total.
The total number of unemployed fell below 13 million for the
first time since February 2009, while the total amount of
employed Americans rose to 141.6 million, an increase of 847,000
from December. The unemployment rate was last this low in
February 2009. The so-called real unemployment rate, which
measures discouraged workers as well and is referred to as the
U-6, nudged lower to 15.1%.

Long-term unemployment, though, remains a problem, with the
duration dropping from a near-record 40.8 weeks to 40.1 weeks.
Also, the level of discouraged workers surged, rising 7% to its
highest level since December 2010. Job growth remains one of the
two missing pieces of the recovery puzzle, even though the rate
has been on a steady trek lower. In December, the economy
created 203,000 jobs and the unemployment rate slipped to 8.5%,
well off its 10.1% cycle peak. The monthly jobs report generally
draws considerable trader reaction, which as of late has been all

Olick - rent vs own riles government policy

"Fannie Mae and Freddie Mac, the mortgage giants under government
conservatorship, together owned 182,212 foreclosed properties as
of the end of September. While they aggressively market and sell
these homes to investors and owner-occupants alike, the numbers
are still too high; these number could go far higher, as
foreclosures previously stalled by paperwork issues come back
into process. That’s why the federal regulator overseeing the
two is launching a bulk sale program, offering investors the
chance to buy foreclosed properties at a discount, as long as
those investors turn the properties into viable rentals for a
specified number of years. 'This rental period could provide
relief for local housing markets that continue to be depressed by
the volume of foreclosed properties, and provide additional
rental options to certain markets,' according to a release from
the regulator, the Federal Housing Finance Agency (FHFA).

The FHFA launched the initial phase of pre-qualification.
Investors must prove they have '(a) the financial wherewithal to
acquire the assets; (b) sufficient experience and knowledge in
financial and business matters to analyze and bear the risks of
the investment opportunity; and (c) agreement to keep certain
information about the REO [Real Estate Owned, i.e. bank owned]
and related matters confidential.' That last part is to keep the
prices competitive as the market starts to improve. Giving
investors the opportunity to help clear the massive amount of
distress in the housing market is crucial. The inventory of
foreclosed properties is large, getting larger, and making it
impossible for the overall market to achieve price stability.
Witness a report today from CoreLogic which shows that home
prices in December fell 4.7% year-over-year including sales of
distressed properties. Excluding those properties, home prices
fell less than one%.

Some, however, think the program is a negative: 'People are
brainwashed to think foreclosures are a bad thing for the housing
market. Perhaps four years ago when a million loans all went into
default and Foreclosure at the same time but not today. Today,
1st timers and investors -- with an insatiable appetite for
foreclosures, REO resales, and short sales -- are the bedrock of
this housing market.' – Mark Hanson, Mortgage Analyst

'Foreclosed homes are already meeting strong demand from
investors when they come to market. We think these buyers are
willing to pay a relatively full price, as they know the specific
locations, and a large number of buyers have the ability to bid
on the individual homes (doesn’t require significant
capital)… Additionally, it will be difficult/expensive for
investors to scale up operations given the broad geographic
dispersion of properties vs. more traditional rental units,
potentially limiting participation.' – Dan Oppenheim,

Oppenheim also asks a valid question as to why the government
would offer discounts to large investors buying in bulk, but not
to individual investors buying perhaps a single property. There
are plenty of Americans out there salivating over incredibly
low-priced homes; rental income could be as much of a boon to
them as perhaps a tax cut or a refinance. It was interesting
yesterday, during his speech touting a proposed new government
mortgage refinance program, President Obama, caught up in the
moment, exclaimed, 'No more renting!' Putting aside the public
relations blunder that was, given the fact that the FHFA had
announced its REO to rent program not two hours before, it just
drove home the conflict our government has between what it thinks
Americans want to hear and what our economic reality dictates.

A few simple facts: There is not enough buyer demand to meet the
number of homes for sale. A huge number of the homes for sale are
empty, foreclosed properties. Too many Americans either cannot
afford to buy a home or do not have the credit necessary to
finance a home. Too many Americans cannot afford to sell their
current homes in order to move or step up to a larger home.
Rental demand is therefore strong and getting stronger. While
homeownership may be a tenet of the 'American Dream,' renting is
today’s actuality for a growing number of Americans. Whether it
is large investor bulk programs or single investor incentives,
adding to rental supply, thereby lowering rents, while at the
same time clearing the market of foreclosed properties is a win.
It may not be as politically palatable as offering 'responsible'
borrowers a veiled tax credit in the form of a mortgage
refinance, but it is good medicine for what ails housing."

Pension threat for market investors

It’s no secret that the financial crisis and resulting malaise
has taken its toll on bank stocks, commodities and Treasury
yields. But it may be have triggered another ripple – one that
has gone somewhat unnoticed. Pension funds have become seriously
underfunded. According to a recent report from Credit Suisse some
of the nation’s largest companies owe their pensions more than
25% of their market cap (after taxes). Although the problem is
complex, at its core is simple math. Many firms forecast returns
of 8% annually, and that just hasn't happened. This developing
situation is potentially market moving because it could require
companies to make larger contributions – much larger. And if
contributions ‘do’ go up, the money will have to come from
someplace on the balance sheet.

“A pension accounting change at UPS will result in $527 million
after tax charge in 2011,” says Joe Terranova. "And Sunoco said
they have to contribute $80 million into their pension funds."
In other words, the need to fund pensions could drag down profits
and, in turn, share price. In fact, the pension liability at AK
Steel was cited by BofA as a reason behind their recent decision
to downgrade the stock to ‘Underperform’ from ‘Neutral.”
“I think in 2012 it will be a recurring issue,” Terranova
says. John Ehrhardt of Milliman confirms the thesis. He tells us
that investors should expect record numbers of earnings charges
in 2012. “Record low interest rates result in historically
high liabilities and the only remaining lever may be employer
contributions.” And according to Ehrhardt this may be just the
tip of the iceberg. "These companies are going to need 20-30%
returns to fill the kinds of gaps we're talking about."

WSJ - Ally financial swings to loss

Ally Financial Inc., the US government-owned auto lender, swung
to a $250 million net loss in the fourth quarter after taking a
charge for regulatory penalties stemming from foreclosure
matters. The Detroit-based lender, which provides financing for
General Motors Co. and Chrysler Group LLC dealers and customers,
continued to make money from its auto-lending operations, but the
results were weighed down again by its mortgage unit, which is
saddled with lawsuits over foreclosures and soured mortgage
investments. The loss compares to a year-ago profit of $79
million. It had a core pretax loss, which reflects results from
continuing operations before taxes and other expenses, of $24
million, down from $526 million. Excluding a $270 million
foreclosure-related charge, core pretax income would have been
$246 million.

"One of our key priorities remains aggressively addressing the
risks related to the mortgage business and taking steps to
protect the key franchises at Ally," Michael Carpenter, the
company's chief executive, said in a statement. "This will be
critical to advance plans to repay the US taxpayer." Ally, which
was formerly owned by GM, is one of at least five major mortgage
servicers in discussions with state and federal regulators over a
potential settlement of "robo-signing" and other alleged
foreclosure offenses. Regulators are close to finalizing a deal
worth as much as $25 billion that could also include Bank of
America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells
Fargo & Co. On Tuesday, Ally said it would record the $270
million charge in the fourth quarter for penalties from
regulators and other government agencies related to foreclosure

The charge was mainly related to its mortgage subsidiary,
Residential Capital, which has been the subject of bankruptcy
speculation for several months. The charge caused a temporary
decline in ResCap's tangible net worth below $250 million,
breaching debt covenants of some of its lenders, Ally said. Ally
has been trying to scale back its mortgage operations as it
focuses on building up its auto business and online retail bank.
In November, the company said it would significantly curtail its
correspondent lending operations, which comprise the bulk of its
mortgage originations.

Mortgage deal closer

With a deadline looming today for state officials to sign onto a
landmark multibillion-dollar settlement to address foreclosure
abuses, the Obama administration is close to winning support from
crucial states that would significantly expand the breadth of the
deal. The biggest remaining holdout, California, has returned to
the negotiating table after a four-month absence, a change of
heart that could increase the pot for mortgage relief nationwide
to $25 billion from $19 billion. Another important potential
backer, Attorney General Eric T. Schneiderman of New York, has
also signaled that he sees progress on provisions that prevented
him from supporting it in the past. The potential support from
California and New York comes in exchange for tightening
provisions of the settlement to preserve the right to investigate
past misdeeds by the banks, and stepping up oversight to ensure
that the financial institutions live up to the deal and
distribute the money to the hardest-hit homeowners.

The settlement would require banks to provide billions of dollars
in aid to homeowners who have lost their homes to foreclosure or
who are still at risk, after years of failed attempts by the
White House and other government officials to alter the behavior
of the biggest banks. The banks — led by the five biggest
mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo,
Citigroup and Ally Financial — want to settle an investigation
into abuses set off in 2010 by evidence that they foreclosed on
borrowers with only a cursory examination of the relevant
documents, a practice known as robo-signing. Four million
families have lost their homes to foreclosure since the beginning
of 2007. If banks fall short of the multibillion-dollar
benchmarks set out for principal reduction and other benefits for
homeowners, they will have to pay the difference plus a penalty
of up to 40% directly to the federal government, according to Mr.
Madigan. The settlement, if all states participate, will also
include $3 billion to lower the rates of mortgage holders who are
current. Banks will get more credit for reducing principal owed
and helping families keep their homes, and less for short sales
or taking losses on loans that were likely to go bad, like those
that were severely delinquent.

102% tax?

James Ross, 58, is a founder and managing member of Rossrock, a
Manhattan-based private investment firm that focuses on
commercial real estate and distressed commercial mortgages. “I
realize I am very fortunate, and in fact I am a member of the
1%,” Mr. Ross wrote in an email. His résumé is studded with
elite institutions: Yale, Columbia Law School and stints at the
law firms Cravath, Swaine & Moore in New York, and Holland & Hart
in Denver. Since his company fits the category of private equity,
he has even carried interest. Yet Mr. Ross told me that he paid
102% of his taxable income in federal, state, and local taxes for
2010. “My entire taxable income, plus some, went to the
payment of taxes,” Mr. Ross said. “This does not include real
estate taxes, sales taxes, and other taxes I paid for 2010.”
When he told friends and family, they were “astounded,” he

That doesn’t mean Mr. Ross pays more in taxes than he earns.
His total tax as a percentage of his adjusted gross income was
20%, which is much lower than mine. That’s because Mr. Ross
has so many itemized deductions. Since taxable income is what’s
left after itemized deductions like mortgage interest, charitable
contributions, and state and local taxes are subtracted, it will
nearly always be smaller than adjusted gross income and
demonstrates how someone can pay more than 100% of taxable income
in tax. Mr. Ross must hope that his interest expense will pay off
down the road and generate some capital gains. Still, all of Mr.
Ross’s itemized deductions are money out of his pocket, which
is why he’s had to draw on his savings to pay his taxes. Robert
Willens, a tax expert and New York attorney, made the argument
that taxable income, therefore, may be a better basis for
measuring the tax burden. Mr. Ross’s plight illustrates
something that came through in nearly every response and cuts
across nearly all income levels: The disparities of the tax code
don’t just pit rich against poor or middle class. It taxes
people within the same income brackets at grossly unequal rates.
“I cannot help but reflect on the unfairness of the current tax
regime,” Mr. Ross wrote. “Why should I pay 102% of my taxable
income in taxes when others, with far greater wealth than mine,
pay a fraction of that?”

Bulk sales begin soon

The government is starting to shed foreclosed, single-family
homes it owns -- by selling them in bulk to investors, who would
turn them into rental properties. Officials, however, are saying
only that test sales will occur "in the near-term" with a focus
on the areas hardest hit by foreclosures. They declined to
comment beyond a news release they issued. The test comes after
the government in summer 2011 asked for proposals on what to do
with more than 90,000 foreclosed properties it then held. The
government typically sells foreclosed properties one at a time,
but officials specifically asked for ways to move homes in bulk
because of the size of the backlog. About 4,000 groups or
individuals submitted ideas on how the government could unload
the properties. After The Enquirer filed a Freedom of Information
Act request, the government released a list of 423 companies,
groups and individuals that submitted responsive proposals, but
no details on their proposals.

The test sale of the foreclosures and conversion of them into
rental housing is being supervised by the Federal Housing Finance
Agency (FHFA). The agency has acted since 2008 as the federal
conservator for Fannie and Freddie, which are public companies
although they were created by Congress. In a news release
Wednesday, the finance agency said "Fannie Mae will offer for
sale pools of various types of assets including rental
properties, vacant properties and non-performing loans" under the
test. It also asked investors to pre-qualify to participate in
the test. The investors will be required "to rent the purchased
properties for a specified number of years." FHFA officials hope
the rental period will "provide relief for local housing markets
that continue to be depressed by the volume of foreclosed
properties, and provide additional rental options to certain

To qualify, investors will have to show the financial wherewithal
to buy the assets, sufficient experience and knowledge to bear
the risks and manage of the investment and agree to "keep certain
information about the REO (real estate) and related matters
confidential." Nationwide, the 83,000 homes currently up for
sale and potential conversion into rental units are among more
than 200,000 foreclosures of all kinds that the government holds,
apparently making it the nation's largest owner of foreclosed
properties. The 200,000 is almost a third of foreclosed
properties across the nation. Moving the backlog would get them
off the books of the Federal Housing Administration. It also
would clear the books of Fannie Mae and Freddie Mac, which buy
mortgages, bundle them and then sell mortgage-backed securities
to investors. The FHA, Fannie and Freddie became owners of the
properties as hundreds of thousands of owners defaulted on their
mortgages during the real estate meltdown. Clearing the backlog
would limit the loss to taxpayers, who already have bailed out
Fannie and Freddie at a cost of $169 billion and counting. The
losses are expected to total $220 billion to $311 billion by the
end of 2014, according to latest projections in December by the
Federal Housing Finance Agency.

Greece misses another deadline

Greece let yet another deadline slip on Monday for responding to
painful terms for a new EU/IMF bailout, as German Chancellor
Angela Merkel made clear Europe's patience is wearing thin over
drawn-out negotiations among its feuding political leaders.
Failure to strike a deal to secure the 130 billion euro ($170
billion) rescue risks pushing Athens into a chaotic debt default
which could threaten its future in the euro zone. Merkel turned
up the heat, saying Athens had to come to terms with the "troika"
of lenders - the European Commission, European Central Bank and
IMF - to get the funds it needs to meet big debt repayments in
March. Greek political leaders, positioning themselves for a
likely general election in April, have baulked at accepting
another package of deeply unpopular wage and pension reductions,
job cuts and tougher tax enforcement measures.

US Treasury prices pared gains notched in today's European
session that were a response to the lack of a political agreement
in Greece to make reforms necessary to avoid default. Limiting
gains, traders are preparing for the government's quarterly
refunding auctions, which will include sales of 10-year notes and
30-year bonds . Yields on 10-year notes, which move inversely to
prices, fell 1 basis point to 1.92%. "Treasurys are modestly
higher as discord among Greek coalition members over the terms of
the second bailout raises the threat of default and has sent the
euro and European stocks lower," said bond strategists at RBS
Securities. "We have a very quiet week of economic data up ahead
and the market's focus will be on the Treasury refunding auctions
which begin tomorrow."

New FHA standards increase Ginnie Mae risk

The Federal Housing Administration's (FHA) recently announced
plans to tighten its standards for approving lenders will
increase prepayment risks for investors who own Ginnie Mae-back
securities, say analysts at Barclays Capital. The agency's plans
to eliminate the consideration of a lender's compare ratio when
deciding whether to streamline-refinance its loans will
accelerate refinancing activity, they say, causing higher
prepayment speeds, and, in turn, reduce investor profits. The
compare ratio is the serious delinquency rate of all loans
originated by a lender during a two-year period relative to the
average of all lenders operating in the same region. Higher
coupon and seasoned loans have a weaker credit and greater
default risks, therefore, streamline-refinancing them could lift
ratio passed 150%. And if it does, the lender could lose the
ability to originate FHA-backed loans. The change is part of a
larger attempt by the FHA to protect its Mutual Mortgage
Insurance Fund, which many say is in danger of requiring a
multibillion dollar government bailout.

Disregarding a lender's compare ratio calculation creates an
incentive for streamline-refinancing higher-risk borrowers,
analysts say. This will speed up Ginnie Mae prepayments,
particularly on higher coupons and pre-2009 originations since
these have the worst credit quality. "That said, we expect the
effect on speeds to be modest," they say. "We believe that this
plan will be implemented and has the potential to raise GNMA
speeds by a few CPR." The effect should be even less for
pre-2010 vintages because their much better credit quality
suggests they have not been constrained by the compare ratios.

Data from the Department of Housing and Urban Development (HUD)
suggest that the compare ratios of most national lenders are now
significantly below the 150% threshold. In December, HUD
Secretary Shaun Donovan, said as a result of an October analysis
by an independent actuary of FHA's insurance fund, HUD plans to
announce how it will address premium prices in its fiscal year
2013 budget proposal. Since then, Congress has enacted a 10
basis-point increase to the FHA annual
mortgage-insurance-premium, and President Barack Obama has called
on the FHA to shoulder a larger role in helping responsible home
owners and the housing market. "Given the circumstances, we
think more changes to the FHA program could be in the works, and
since the budgetary proposal should be released over the next few
weeks, the timing is peculiar," they said. "Therefore, Ginnie Mae
faces heightened risks in the near term."

Washington state considers short sale protection

Banks could soon be barred from pursuing deficiency judgments
against Washington state borrowers after a short sale. A Senate
committee in the Washington State Legislature will hold a hearing
over H.B. 2718, which states that if a bank "writes off debt from
the short sale, they can't then subsequently collect this debt
from the seller. The bill was modeled after similar action passed
in Oregon last summer. The bill if passed does not require the
lender to accept a short sale offer. It would go into effect with
90 days of being passed. According to a Washington Realtors
alert put out late last week, a borrower would report the write
off to the Internal Revenue Service and take a tax deduction for
the loss. This same amount is also counted as taxable income for
the seller. "Providing certainty and consumer protections for
short sale sellers is critical in the current real estate
market," the trade group said. "Successful short sales often
prevent foreclosures that would harm consumers, tax revenue and
economic recovery." After the Oregon bill took effect in June,
REO numbers became choppy and then began to fall at the end of
the year. In September, repossessed homes totaled 1,420,
according to RealtyTrac. That number increased to 2,057 the
following month then slid to 936 in November and 874 in December.
Some of that could be due to seasonal trends. Most lenders put
repossessions on hold during the holiday season, but the December
total was down 29% from the same month one year earlier.

S&P warns of rate cuts over health costs

Ratings agency Standard & Poor's warned it may downgrade "a
number of highly rated" Group of 20 countries from 2015 if their
governments fail to enact reforms to curb rising healthcare
spending and other costs related to aging populations. Developed
nations in Europe, as well as Japan and the United States, are
likely to suffer the largest deterioration in their public
finances in the next four decades as more elderly strain social
safety nets, S&P said in a report. "Steadily rising healthcare
spending will pull heavily on public purse strings in the coming
decades," S&P analyst Marko Mrsnik wrote in the report. "If
governments do not change their social protection systems, they
will likely become unsustainable." If no reforms are adopted,
healthcare-related credit downgrades would likely start within
three years, eventually leading to an increase in the number of
junk-rated countries as of 2020, the study showed.

Olick - US Treasury forcing principal forgiveness

"Late Friday the US Treasury Department announced a major
expansion of its Home Affordable Modification Program (HAMP).
The three-year-old program has been largely deemed unsuccessful,
as it has provided just about 750,000 borrowers with permanent
loan modifications. The initial expectation from government
officials was that it would help three to four million borrowers.
'Clearly the initial program erred on the side of making sure
taxpayers were protected, but it didn’t do enough to help the
overall economy,' said Michael Barr, former Asst. Treasury
Secretary for Financial Institutions and one of HAMP’s original
architects. Now taxpayers will pony up the cash, as Treasury is
tripling the financial incentives to lenders and opening the
program up to Fannie Mae, Freddie Mac and investors in rental
properties. The money would come out of TARP funds, i.e. from the
taxpayers. We still don’t know if Fannie and Freddie will
participate, since their conservator, the FHFA’s Ed DeMarco,
has been actively fighting principal write down for years. A week
ago he sent a letter to members of congress explaining the math
behind his argument.

But the Treasury may be forcing DeMarco’s hand. He claimed that
writing down mortgage principal would cost $4 billion more than
the modifications that Fannie and Freddie are doing now. Those
involve interest rate reduction and principal forbearance. The
newly expanded HAMP, however, with its triple- sized cash
incentives, would shore up that $4 billion hole. Funny how he
mentioned that hole on Monday, and the Treasury announced the new
plan Friday. 'If he [DeMarco] doesn’t get to yes, then he has
no political leg to stand on,' says FBR’s Ed Mills, who
estimates the enhanced program could add one million borrowers to
its ranks. Mills says a ‘no’ from DeMarco would enable the
Obama Administration to replace him, which it tried to do once
before, only to be blocked by members of Congress. 'It would be
an appropriate response for him to do it,' says Barr of DeMarco.
'I do think they should participate.' I asked Barr why the
Treasury waited three years to use the TARP funds for principal
reduction. The obvious answer is that this is presidential
election year, and the housing market is still floundering, but
Barr claims the Treasury was just being careful. 'It’s a use
of taxpayer funds, and you want to make sure you’re not
providing more of an incentive than is required,' he said. 'One
person’s successful program is another person’s bailout.'"

Treasury department stirs the pot

The Treasury Department is investigating a report that Freddie
Mac, the mortgage giant, bet against homeowners’ ability to
refinance their loans even as it was making it more difficult for
them to do so, Jay Carney, the White House spokesman, said
yesterday. ProPublica and National Public Radio reported that
Freddie Mac, which maintained slightly tighter restrictions than
Fannie on homeowners’ eligibility to refinance, had a
multibillion-dollar investment whose value hinged on borrowers
continuing to pay higher interest rates. Beginning in 2010,
Freddie bought several billion dollars’ worth of “inverse
floater” securities — essentially the interest-paying portion
of a bundle of mortgages — for its investment portfolio while
selling the far less risky principal portion. Fannie and Freddie
are supposed to be decreasing the size of their investment
portfolios. There is no evidence that Freddie tailored its
refinancing standards to its investing strategy, but “inverse
floaters” make less money if the loans they cover refinance to
a lower interest rate. Freddie issued a statement yesterday
defending its commitment to helping homeowners. “Freddie Mac is
actively supporting efforts for borrowers to realize the benefits
of refinancing their mortgages to lower rates,” it said. The
company said refinancing accounted for 78% of its loan purchases
in 2011.

HAMP 2.0

The expansion of the Home Affordable Modification Program (HAMP)
by the Treasury Department is expected to benefit special
mortgage servicers, mortgage insurers and nonagency
mortgage-backed securities holders, while having no material
effect on agency MBS, Keefe, Bruyette & Woods said yesterday.
Previously, if a borrower's first-lien monthly mortgage payment
was lower than 31% of income, the borrower was ineligible for
HAMP. Factoring other debts to the evaluation will expand the
pool of borrowers who can now qualify for HAMP. Investors also
were given new incentives for accepting principal write-downs,
with the financial benefits for such an action increasing from a
range of 6 to 21 cents on the dollar to 18 to 63 cents. The
Obama administration also extended the HAMP program deadline
through December 2013. "We believe that the more flexible
debt-to-income ratio and the inclusion of some investor
properties will have a positive impact on modification activity,"
KBW analysts said in its research note. "The impact of the
increased principal reduction incentives remains unclear.

While it should help the nonagency sector, the impact would be
far greater if there was GSE participation. The response from
FHFA on Friday afternoon suggests that the GSEs might not
participate," according to KBW analysts. The research firm
expects the changes to have "no material impact on agency MBS
prepayment speeds." However, special servicers in the mortgage
industry are expected to benefit from the modifications. Ocwen
Financial Corp. earned $28.3 million in HAMP incentive fees in
the first nine months of 2011, and KBW believes other firms also
will benefit from an expanded HAMP program. Barclays Capital
analysts also see the changes as having no significant impact on
agency MBS. "The reason is that the vast majority of debt
forgiveness will be on delinquent loans, which are typically
already bought out of the agency MBS trust," Barclays wrote.
"The only effect might be from the moral hazard side: if
underwater borrowers in agency MBS pools start going delinquent
on purpose to qualify for debt forgiveness, speeds will obviously
rise. But we think this is unlikely to have a significant effect
on agency speeds."

OC Register - investors are the answer

"According to a foreclosure sales report by RealtyTrac,
foreclosure-related homes are still being gobbled up -- they
represent 20% of total transactions in 2011 Q3. Foreclosures are
usually viewed as a supply and price issue. High foreclosures
keep home prices down, creating negative equity — and declining
home prices keep foreclosures coming. This is a seemingly vicious
cycle that feeds into the "shadow supply" problem and looks
potentially like a never ending story. But all vicious cycles
eventually come to an end in a capitalist market system.
Ironically, it is the enthusiastic response of investors and
regular buyers to low-priced foreclosed homes, which could
eventually break the foreclosure cycle. Foreclosure-related home
sales were one-fifth of total US home sales in the third quarter
vs. 22% in the quarter before and 30% during the third quarter of

The decline in the market share of foreclosure-related home sales
is partially explained by various hurdles to the efficient
conclusion of the foreclosures process, but "even with the
hurdles to selling foreclosures, foreclosure sales continue to
represent a historical high percentage of all sales," says
RealtyTrac. Foreclosures' shrinking share could also be caused by
declining mortgage delinquencies, which have been dropping
relatively quickly in California, according to the Mortgage
Bankers Association. In California, the share of foreclosure
related sales was 44% in the third quarter. California has one of
the most efficient foreclosure recycling processes in the nation,
so temporary supply constraints are not that big of an issue as,
for example, they may be in Florida. Strong demand may be
stabilizing the average sales price of home in foreclosure, too,
which was up 1% from the previous quarter and down just 3% for
the third quarter in 2010. The reported average discount for
foreclosed properties relative to regular homes was 34% -- but I
wouldn't read too much into these numbers because they are not
quality adjusted. Still, declining mortgage delinquencies and
strong demand for foreclosure product could mean that the end may
soon be here for the foreclosure business — and what's lurking
in the shadows."

Income up, spending down

The Commerce Department said today that spending was the weakest
since June and followed a 0.1% gain in November. Economists
polled by Reuters had expected spending, which accounts for more
than two-thirds of US economic activity, to nudge up 0.1% last
month. For all of 2011, spending rose 4.7%, the largest increase
since 2007. When adjusted for inflation, spending dipped 0.1%,
breaking three straight months of gains. It increased 0.1% in
November. The government reported on Friday that consumer
spending grew at a 2.0% annual pace in the fourth quarter,
helping to lift gross domestic product 2.8% — acceleration from
the third-quarter's 1.8% rate. Part of the spending, which has
been concentrated in motor vehicles, has been funded from savings
and credit cards as high unemployment constrains wage growth.

Wages rose last month, helping to prop-up incomes. Income
advanced 0.5%, the largest gain since a matching increase in
March, and followed a 0.1% rise in November. Economists had
expected income to rise 0.4%. Consumer spending is closely
watched because it accounts for 70% of economic activity.
Unemployment stands at 8.5% — its lowest level in nearly three
years after a sixth straight month of solid hiring. For the
final three months of 2011, Americans spent more on vehicles, and
companies restocked their supplies at a robust pace. Still,
overall growth last quarter — and for all of last year — was
slowed by the sharpest cuts in annual government spending in four
decades. And many people are reluctant to spend more or buy
homes, and many employers remain hesitant to hire, even though
job growth has strengthened.

LPS - 2010-2011 originations good quality

The December Mortgage Monitor report released by Lender
Processing Services shows mortgage originations continued their
decline from 2011’s September peak, down 10.1% from the month
before. At the same time, those loans originated over the last
two years have proven to be some of the best quality originations
on record. Likely a result of tighter lending requirements,
2010-11 vintage originations showed 90-day default rates below
those of all other years, going back to 2005. December
origination data also shows that recent prepayment activity – a
key indicator of mortgage refinances – has remained strong,
with 2008-09 originations, high credit score borrowers and
government-backed loans having benefited the most from recent,
historically low interest rates.

Looking at judicial vs. non-judicial foreclosure states, LPS
found that half of all loans in foreclosure in judicial states
have not made a payment in more than two years. Foreclosure sale
rates in non-judicial states stood at approximately four times
that of judicial foreclosure states in December. Still, on
average, pipeline ratios (the time it would take to clear through
the inventory of loans either seriously delinquent or in
foreclosure at the current rate of foreclosure sales) have
declined significantly from earlier this year.

The December mortgage performance data also showed that
foreclosure starts continued to decline, remaining at multi-year
lows as of the end of 2011; down 3.7% for the month, and nearly
40% for the year. As reported in LPS' First Look release, other
key results from LPS' latest Mortgage Monitor report include:

Total US loan delinquency rate: 8.15%

Month-over-month change in delinquency rate: 0.0%

Total U.S foreclosure pre-sale inventory rate: 4.11%

Month-over-month change in foreclosure pre-sale inventory:

States with highest percentage of non-current loans: FL, MS, NV,

States with the lowest percentage of non-current loans: MT, WY,

Big banks hedge against EU

Five large American banks, including JPMorgan Chase and Goldman
Sachs, have more than $80 billion of exposure to Italy, Spain,
Portugal, Ireland and Greece, the most economically stressed
nations in the euro currency zone, according to a New York Times
analysis of the banks’ financial disclosures. But these banks
have made extensive use of a type of financial insurance, called
credit default swaps, to help them offset any losses that might
occur if defaults swamped the five troubled nations. Using these
swaps, along with other measures, the five banks have cut their
theoretical exposure to the troubled countries by $30 billion, to
$50 billion. The analysis also shows that Citigroup has the
greatest percentage of its exposure potentially protected at 47%,
while Bank of America has bought the least protection at 12%.
Big banks have reduced their sovereign debt exposure, but they
still have tens of billions of dollars of it. Credit-default
swaps have functioned well for big bankruptcies, but they were
also a big source of systemic weakness in 2008, when the American
International Group nearly collapsed because it could not make
payments on its side of its swaps contracts. Some market
participants now doubt they would work properly during periods of
great financial instability. “The likelihood of actually
getting paid out from owning a credit default swap would be
troubling to me if this were my hedge against a systemic shock
— especially in a political environment unfriendly to more Wall
Street bailouts,” Mark Spitznagel, chief investment officer at
Universal Investments, a hedge fund, said through a spokesman.

Olick - foreclosure pipeline swells

"The number of new foreclosures in 2011 dropped nearly 40%,
according to year-end numbers just released by Lender Processing
Services (LPS); there is, however, little cause for celebration.
The fall is largely due to moratoria and process reviews stemming
from the so-called 'robo-signing' foreclosure paperwork scandal.
Mortgage delinquency rates were largely unchanged from last year,
which means all that distress will be pushed forward to 2012 and
beyond. To give you an idea of just how much the 'robo' scandal
is toying with the numbers, LPS compared states that require
foreclosures to go through the courts versus states that don’t
(judicial versus non-judicial) and found the following:

- 50% of loans in foreclosure in judicial states have not made a
payment in two years, as opposed to 28% in non-judicial states.

- Foreclosure sale rates in non-judicial states are about four
times those in judicial states.

'Nationally, foreclosure pipelines remain at historic highs, but
they are clearing at very different rates depending upon state
procedures,' says Herb Blecher of LPS Applied Analytics. With
the nation essentially split between judicial and non-judicial
foreclosure states, it’s safe to say the foreclosure crisis
will linger longer than anyone expected, especially with
negotiations for a settlement between big banks and state
attorneys general hitting yet another roadblock. California
Attorney General Kamala Harris rejected the latest proposal this
week, calling it inadequate. 'Our state has been clear about
what any multistate settlement must contain: transparency, relief
going to the most distressed homeowners, and meaningful
enforcement that ensures accountability. At this point, this deal
does not suffice for California,' she wrote in a statement. Bank
sources say that without California the value of the settlement
would drop by billions and banks would still have major liability
for foreclosure fraud. About one fifth of the nation's
foreclosures are in California."

Replacements to help drive economy

Four years after the downturn began, the replacement cycle shows
signs of kicking into a higher gear in the United States even
among small businesses, and it could give an unexpected boost to
growth and employment this year. In the United States, large
corporations have already dug into huge cash piles to upgrade
plant and equipment, adding incrementally to an economy that grew
by 2.8% in the fourth quarter. Now small businesses, which drive
about half of US economic growth and a big chunk of job creation,
are increasing their spending on equipment, too, an important
precursor to stronger hiring. For the early signs of this small
business revival, Ian Shepherdson, chief US economist at High
Frequency Economics, points to two factors: access to credit has
improved markedly as shown by a surge in banks' commercial and
industrial lending, and an index of capital expenditure
intentions, as measured by the National Federation of Independent
Business (NFIB), is climbing. NFIB policy analyst Holly Wade said
anecdotally she hears of more businesspeople talking of
increasing their budgets. "They have stretched out their
machinery and equipment and would have normally invested in
replacement, but they were waiting as long as possible. Now they
are starting to see better sales and earnings, and they are more
comfortable investing some of those dollars in capex," she said.
"In the next three to six months, it wouldn't be surprising to
see the same rate of growth in capital outlays we have seen

FHA - originations down, delinquencies up

The serious delinquency rate for Federal Housing Administration
(FHA) mortgages reached 9.6% in December, the highest level in
more than two years, the Department of Housing and Urban
Development (HUD) said. More than 711,000 FHA-insured loans were
seriously delinquent, up 18.9% from one year earlier, according
to the HUD report. It's also a 3.2% increase from the month
before. The delinquency rate has been steadily increasing since
passing 8.2% last summer. Meanwhile, originations are down. In
December, the FHA insured 93,700 mortgages, a nearly 30% decline
from the 133,000 insured in December 2010. In its fiscal year
2011, the FHA Mutual Mortgage Insurance Fund slipped to a 0.24%
capital ratio from 0.5% the year prior. By law, the fund must
remain above 2%. FHA officials attempted to temper fears that
the fund would need a bailout. An independent study done showed
home prices would have to deteriorate significantly before an
injection of tax dollars would be needed.

"It would take very significant declines in home prices in 2012
to create a situation where FHA would need additional support,"
said FHA Acting Commissioner Carole Galante when the projections
came out. American Enterprise Institute Fellow Edward Pinto
isn't convinced. His study claimed that FHA is actually
undercapitalized by as much as $53 billion using more traditional
accounting rules. The FHA put new guidelines in place this week
that would tighten restrictions on lenders seeking approval to
write FHA mortgages. Also, the changes would force more firms to
buyback defaulted home loans and reduce seller concessions, which
Pinto said would have the most impact, according to Pinto. "We
need to get back to where the mortgages themselves stand on their
own regardless of what happens with house price inflation or
deflation," Pinto said. - no kudos for the POTUS

President Obama's announcement in last week's State of the Union
address that he has created a new unit to probe mortgage abuse
earns no cheers from us. Instead, we are reminded how shamefully
little has been done to address the housing crisis that continues
to plague so many Americans. The Making Home Affordable mortgage
relief program has been an utter flop. An attempt by the
Department of Justice to broker a multistate settlement with
major banks over foreclosure abuses that would fund relief for
struggling homeowners has gone nowhere. There have been no
meaningful prosecutions, no significant relief for homeowners and
few new fraud protections. Now, what little break has been
granted to troubled homeowners -- in the form of tax relief on
canceled mortgage debt -- is due to expire at year's end and too
few seem aware of the looming deadline.

Normally, debt that is forgiven or canceled by a lender in a
foreclosure or short sale must be included as income on tax
returns and is taxable. However, the Mortgage Forgiveness Debt
Relief Act of 2007 excluded the reporting of up to $1 million in
canceled debt on a primary residence for tax purposes. But not
for long. Local real estate agents report no frenzy of calls or
uptick in clients wanting to carry out short sales. Scott Tobias,
president of the Bakersfield Association of Realtors, told The
Californian last week that "I think, basically, homeowners don't
know about" the tax relief expiring on Dec. 31, 2012. With
nearly half of all Bakersfield mortgages underwater, it's
essential for people to know of the upcoming tax break
expiration, especially considering that it can take months to
close a short sale. The housing market is nowhere near recovery;
Congress ought to extend the tax relief. But no one should rely
on Congress to act. It's imperative for underwater homeowners to
understand their options and be informed about the looming tax

60 BOA short sales in Florida

Only 60 Floridians have received cash from a Bank of America
(BOA) program that pays up to $20,000 to homeowners who sell
distressed properties in a short sale. The lender still expects
thousands more in the Sunshine State to collect the money before
the pilot program ends in August. Bank spokesman Richard Simon
said it's too early to judge the results. "There are some
encouraging signs in this early stage," he said. "This is just
the start of the process." Several Realtors and title agents
around Tampa Bay said deals are in the pipeline, but none has
finalized any of the sales. Real estate agents say some lenders
have been closing the deals in 45 to 60 days instead of a year or
longer. Bank of America had targeted 20,000 of the 1.1 million
mortgages it services in Florida. In the program, qualified
homeowners would get 5% of the unpaid mortgage balance as of
August 2011, with a minimum payout of $5,000. And so on up to a
maximum of $20,000. The sales price does not impact the payout.
By offering the incentive, Bank of America saves attorney fees,
court costs and property taxes by avoiding foreclosure. It also
speeds the process of getting bad loans off its books and gets
the properties back on the market faster. To sweeten the deal
further, the lender said it would consider waiving the deficiency
on the mortgages, which would allow homeowners to sell the house
for less than they owe for it without having to make up the
difference to the bank. The bank tested the program only in
Florida because of the higher foreclosure rates.

Asia to drive natural gas demand

Despite natural gas prices falling to near 10-year lows last
week, Royal Dutch Shell's CEO Peter Voser says demand for gas
will be much higher than oil in the long term with the
Asia-Pacific region driving the sector's growth. "I think you
cannot travel around Asia at the moment without getting the
question, 'can you sell us some LNG (liquefied natural gas)?'"
Voser at the World Economic Forum in Davos. Low demand and high
inventory levels in the US has deterred some companies from
future investments, but according to Voser, America's waning
demand doesn't reflect what is happening in the rest of the
world. "If you're talking about North American gas, clearly the
current price levels are not sufficient to actually bring all the
developments forward. You have seen a lot of companies starting
to cut their production." With oil and gas production normally
taking seven to eight years to come on stream, Voser says Shell
is sticking to its long-term strategy to produce more natural
gas. "We produce more gas in 2012 now, 52% versus 48% oil," he
said. "Clearly Asia-Pacific, that's going to be the driver."

WSJ - mortgage rates rise

Rates for fixed mortgages moved higher over the past week amid
positive signals from the long-suffering US housing market,
according to Freddie Mac’s weekly survey of mortgage rates.
“Fixed mortgage rates ticked up this week as the housing market
ended 2011 on a high note,” said Freddie Mac Chief Economist
Frank Nothaft, noting encouraging data like a report that
existing home sales rose 5% at the end of the year to 4.61
million houses, the largest amount since May 2010. The 30-year
fixed-rate mortgage averaged 3.98% for the week ended Thursday,
up from 3.88% the previous week, though below 4.8% a year ago.
Rates on 15-year fixed-rate mortgages averaged 3.24%, up from
3.17% last week and below 4.09% a year earlier. Five-year
Treasury-indexed hybrid adjustable-rate mortgages, or ARM,
averaged 2.85%, up from 2.82% last week and below 3.7% a year
ago. One-year Treasury-indexed ARM rates averaged 2.74%, matching
the prior week and below 3.26% last year. To obtain the rates,
30-year and 15-year fixed-rate mortgages required an average 0.7
percentage point and 0.8 percentage point payment, respectively.
Five-year and one-year adjustable rate mortgages required an
average 0.7 percentage point and 0.6 percentage point payment,
respectively. A point is 1% of the mortgage amount, charged as
prepaid interest.

Growth up in Q4

US gross domestic product expanded at a 2.8% annual rate, the
Commerce Department said on Friday, a sharp acceleration from the
1.8% clip of the prior three months and the quickest pace since
the second quarter of 2010. It was, however, a touch below
economists' expectations for a 3.0% rate. Consumer spending,
which accounts for about 70% of US economic activity, stepped to
a 2% rate from the third-quarter's 1.7% pace - largely driven by
pent-up demand for motor vehicles. Spending was also lifted by
moderate inflation. A price index for personal spending rose at
a 0.7% rate in the fourth-quarter, the slowest increase in 1-1/2
years, after rising at a 2.3% pace in the July-September period.
A core inflation measure, which strips out food and energy costs,
increased at a 1.1% rate after rising 2.1% in the third quarter.
The increase last quarter was the smallest in a year and put this
measure well below the Fed's 2% target.

Growth in the fourth quarter got a temporary boost from the
rebuilding of business inventories, which was the fastest since
the third quarter of 2010, after they declined in the
third-quarter for the first time since late 2009. Inventories
increased $56.0 billion, adding 1.94 percentage points to GDP
growth. Excluding inventories, the economy grew at a tepid 0.8%
rate, a sharp step-down from the prior period's 3.2% pace. The
robust stock accumulation suggests the recovery will lose a step
in early 2012. Also pointing to slower growth, business spending
on capital goods was the slowest since 2009, a sign the debt
crisis in Europe was starting to take its toll. Expectations of
soft growth led the Federal Reserve on Wednesday to say it
expected to keep interest rates at rock bottom levels at least
through late 2014. Fed Chairman Ben Bernanke said the central
bank, which forecast growth this year in a 2.2% to 2.7% range,
was mulling further asset purchases to speed up the recovery.
The Fed warned the economy still faced big risks, a suggestion
the euro zone debt crisis could still hit hard.

Absorption rates to improve in 2012?

Net absorption rates in the US turned positive during 2011 for
all major property types, according to CBRE Econometrics, which
expects the trends to continue in 2012 on the heels of employment
growth and then accelerate in 2013. The absorption rate is the
percentage of units expected to be rented or purchased over a
period of time. After a downturn across all property types,
annualized apartment absorption turned positive at the beginning
of 2010, office by mid-2010, industrial in 2010, and finally
retail in mid-2011, analysts at Barclays Capital said. In the
apartment sector, CBRE forecasts a 0.7% absorption rate in 2012
and then 1.2% in 2013. Office property, the company said, will
experience a 0.6% rate in 2012 and 1% in 2013, while the
industrial sector should see a 1.1% rate in 2012 and 1.5% in
2013. Retail property will have a 0.7% absorption rate in 2012
and then 1.2% in 2013. Grubb & Ellis said the overall outlook
for the office market is stronger for 2012. The real estate
services firm also expects the industrial sector to experience
increased demand this year with total net absorption of 110
million square feet. Net absorption rates usually follow
employment growth. An exception came during the recent downturn
when each property type outperformed relative to the levels of
job losses suffered during 2008 and 2009. Given the positive net
absorption across property types and almost no new construction,
occupancy rates, or the number of occupied units at a given time,
began to improve in the third quarter. According to CBRE,
apartment occupancy rose 0.8% from a year earlier to 95%. Office
occupancy increased 0.6% to 83.8%, while the industrial sector
inched higher 0.9% to 86.3%. Retail, the only laggard, is down
0.1% from a year earlier to 86.8%.

2012 to be the best year for short sales?

The Mortgage Debt Forgiveness Act of 2007 allows an income tax
exemption for a homeowner whose mortgage debt is partly or
entirely forgiven by a bank. It's set to expire Dec. 31, 2012.
Matt Alegi, a partner with the Potomac law firm Shulman Rogers
and chair of the firm's residential real estate practice group,
says the tax break has meant a savings in the tens of thousands
of dollars for individuals. Typically, if someone were to have
$150,000 forgiven by the bank, Alegi says, "you just made another
$150,000 of income for tax purposes in that year." So, say
someone makes $50,000 but had $150,000 forgiven by the bank. That
person is now paying taxes on a $200,000 income, and included in
a much higher tax bracket. The loss of the relief will plunge
homeowners further into debt, Alegi says.

He also thinks the expiration of the Debt Forgiveness Act will
have an impact on short sales themselves. Homeowners could try to
push the short sale through this year to take advantage of the
tax break. Alegi believes there will be strong lobbying to
extend the tax break. If it isn't extended, the appeal of a short
sale could greatly diminish for the homeowner. To take advantage
of the Debt Relief Act, you need to fall under very specific
guidelines outlined by the IRS. For example, the debt forgiven
is only for primary residences and the debt must have been used
to buy, build or substantially improve your principal residence
and be secured by that residence. Alegi says homeowners who
spent the forgiven money on education or other bills do not

Gridlock an Obama strategy?

When President Obama outlines his goals for 2012 during
Tuesday’s State of the Union address, he shouldn’t expect a
lot of cooperation from Republicans, senate Minority Leader Mitch
McConnell (R-Ky.) said yesterday. “With the Obama economy
established now…unemployment is still at 8 ½%,” McConnell
said. “It didn’t work, and we’re not interested in doing
more of the things that don’t work.” He said Obama was
“AWOL” last year on his bus tour when Republicans wanted to
tackle tax reform and entitlements, and he expects more of the
same this year. “He was not involved whatsoever,” McConnell
said. “So I’m not optimistic, frankly, that in an election
year that he’s likely to be any more engaged than he was last
year.” What’s more, he thinks the logjam in the nation’s
capital is part of Obama’s agenda. “That’s his
strategy…to demonize Congress, to complain because he can’t
continue to get everything he wants, like he did the first two
years,” he said. “It’s all about his re-election and not
about the country.” One thing that McConnell thinks will get
done is the payroll tax cut extension, which was extended for
only two months in December when Congress couldn’t come to an
agreement. “We’ll be back at trying to figure out how to do
that for the balance of the year and how to pay for it,” he
said. “We don’t want to add to the deficit.”

What the $25 billion bank deal means

According to an Associated Press report, five major banks -- Bank
of America, JPMorgan Chase, Wells Fargo, Citibank and Ally
Financial -- and US state attorneys general could adopt the
agreement within weeks. It's expected President Barack Obama will
mention new developments in the negotiations in his State of the
Union address today. A settlement between the banks and the
states doesn't mean homeowners who lost their homes to
foreclosure will get them back. In fact, they're unlikely to
benefit much at all financially, though the total financial
settlement could be as high as $25 billion. What's worse is the
settlement does not apply to loans held by Fannie Mae or Freddie
Mac. Since Fannie and Freddie own about half of all US mortgages
- or 31 million US home loans - that means a lot of homeowners
who have been hurt by the banks' deceptive foreclosure practices
won't be getting much-needed assistance. Nearly 11 million
people - one in four homeowners - owe more than their home is
worth. According to current guidelines, these underwater
homeowners have few options and little chance at refinancing.
Here's how the settlement could shape up:

- $17 billion would go toward reducing the principal balance
struggling homeowners owe on their mortgages.

- $5 billion would be put into a reserve account for various
state and federal programs. A portion of this money would cover
the $1,800 checks that would be sent to homeowners affected by
deceptive practices. Only about 750,000 Americans, or half of the
households who might be eligible for assistance under the deal,
will likely receive checks.

- About $3 billion would be used to help homeowners refinance at
5.25%, far below current mortgage interest rates.

If the proposed settlement terms are accepted, roughly 1 million
of these homeowners could see the principal amount of their
mortgages reduced by an average of $20,000. That's good news for
some, but bad news for the other 10 million homeowners who would
like to claim a principal reduction but won't qualify. The
better news is this settlement has the potential to reshape
long-standing lending guidelines and make things easier for
at-risk and underwater homeowners across the board. But critics
say it doesn't do enough. Sen. Sherrod Brown (D-Ohio) tells the
Associated Press: "Wall Street is again trying to pass the buck.
Instead of criminal prosecutions, we're talking about something
that's not more than a slap on the wrist." Some states have
disagreed over what to offer banks, with states like New York,
Delaware, Nevada and Massachusetts arguing banks should not be
"protected from future civil liability." The deal will not fully
release banks from future criminal lawsuits by individual states,
and a few of those states' attorneys general have already
promised to pursue their own investigations. Bank officials have
argued few, if any, foreclosures wrongfully took place as a
result of documentation issues. Ally Financial CEO Michael
Carpenter has been among the most vocal, claiming the company
found no instances of wrongful foreclosure after its own internal
audit. Carpenter has said he will fight the government in court
if need be.

US Treasurys edge higher after Greek setback

US Treasurys edged higher today, after euro zone finance
ministers rejected an offer by private creditors to restructure
Greek debt, keeping alive fears of a default. Benchmark 10-year
note's yield was at 2.06%, compared with 2.058% in late US trade
on Monday. The yield rose as high as 2.094% on Friday, its
highest since early December. The 30-year bond yield was at
3.14%. Demand for safe-haven US debt was further boosted after a
report rekindled fears that Portugal, seen as the second most
risky country in the euro zone, could be the next potential
default candidate after Greece. Further dousing optimism,
Germany denied a report that it was ready to boost the combined
firepower of the euro zone's rescue funds to 750 billion euros
($979 billion). During its two-day policy meeting starting on
Tuesday the Federal Reserve is expected to push out expectations
on when it will next raise interest rates until at least 2014,
and the meeting will also be closely watched for any hints of new
QE, which analysts expect would focus on mortgage-backed bonds.
The Treasury Department will sell four-week bills and two-year
notes later in the day. The Treasury will sell a total of $99
billion in new two-year, five-year, and seven-year notes this

Mortgage writedowns to cost taxpayers $100 billion

Forgiving mortgage debt on Fannie Mae and Freddie Mac loans would
cost the taxpayer-funded companies almost $100 billion, their
regulator said. The Federal Housing Finance Agency (FHFA) said
that as of June 30, the companies guaranteed nearly 3 million
mortgages on single- family homes that are underwater, or worth
less than the loans they secure. "FHFA estimates that principal
forgiveness for all of these mortgages would require funding of
almost $100 billion," FHFA Acting Director Edward J. DeMarco said
in a Jan. 20 letter to Representative Elijah Cummings, a Maryland
Democrat who had threatened to subpoena the information. The FHFA
posted the letter on its website today. Nearly 80% of the Fannie
Mae and Freddie Mac borrowers with negative equity were current
on their payments, DeMarco said.

DeMarco, whose agency was created by Congress to minimize losses
at Fannie Mae and Freddie Mac and is independent of President
Barack Obama's administration, has maintained that principal
forgiveness would increase the size of the government's bailout
of the companies, which have cost taxpayers more than $153
billion since they were taken under government control in 2008.
The agency compared the cost of principal forgiveness to the
companies' current practice of forbearance, which allows
delinquent borrowers to defer payments. "Given that any money
spent on this endeavor would ultimately come from taxpayers and
given that our analysis does not indicate a preservation of
assets for Fannie Mae and Freddie Mac (FMCC) substantial enough
to offset costs, an expenditure of this nature at this time
would, in my judgment, require congressional action," he said.

WSJ - EU tries to revive Greek talks

European Union finance ministers today piled pressure on Greece
and its private-sector creditors to do more to ensure that a
proposed deal to restructure Greece's private-sector debt will be
enough to put the country back on a firm fiscal footing. The
International Monetary Fund (IMF) and the euro zone's four
triple-A-rated countries-—Germany, the Netherlands, Finland and
Luxembourg—are pushing for a low average interest rate on new
bonds to be issued as part of the restructuring, in order to
ensure the government can pay its debts in the future. But as
they were heading to a meeting Tuesday, EU finance ministers also
urged Greece to implement tough austerity and structural reforms
and provide more written assurances to its partners that it would
commit to its pledges before further aid can be released.
Austrian Finance Minister Maria Fekter said she's "not pleased"
with progress so far. "We're sending a very direct message to
Greece that the community expects more, also in terms of
structural reform," she told reporters. "We're not pleased and
only when there's a written message on the table in front of us,
can further assistance be discussed."

Greece's debt restructuring is planned to take the form of a bond
exchange in which creditors holding some €200 billion ($260.32
billion) in debt would swap their securities for new instruments
with half the face value. The key sticking point is how much
interest the new bonds should pay. The restructuring is part and
parcel of the second bailout program for Greece amounting to
€130 billion. Without this loan, Greece will default on a
€14.4 billion bond maturing March 20. But talks in Athens with
the Institute of International Finance, which represents the
majority of Greece's private-sector creditors, have dragged on
for three weeks and stalled over the weekend. Private-sector
creditors said in a final offer that they won't accept an average
interest rate of less than 4%. The IMF voiced concerns yesterday
that the deal being discussed by Greece and the creditors would
leave the country with a higher-than-expected debt burden in the
years ahead, people familiar with the matter said. That sets up
a difficult choice: press bondholders to accept more losses, or
accept that Greece's peers and the IMF will have to kick in more

Olick - foreclosure investors a double edged sword

"The best and most expeditious way to clear the vast inventory of
foreclosed properties weighing down today’s housing market is
to get more investors in and sell them these properties at bulk
discounts. That’s what the Obama administration and Federal
regulators are currently considering for the thousands of homes
currently owned by Fannie Mae, Freddie Mac and the FHA. While
big private equity funds are still largely in a very tedious
deal-making stage with banks or waiting on the sidelines for a
government program, smaller individual investors are getting in.
Nearly 23% of home purchases in December were by investors,
according to a new survey from Campbell/Inside Mortgage Finance.
That is a slight increase from November, but the share has
remained largely unchanged for the past year. What has changed
dramatically is how many of these investors are using
all-cash…74% according to the survey, which also found that,
'cash buyers are able to bid significantly lower—and
successfully—on many properties because they offer a shorter
and more reliable closing timeline.' That is precisely what
mortgage servicers want.

'While investor bids may not be the first offers accepted, they
often end up winning properties after other homebuyers are
eliminated because of mortgage approval or timeline problems,'
according to the survey authors. 'Appraisals below the contracted
price are a common reason for mortgage denials. Most mortgage
financing timelines are now in excess of 30 days.' There has
been a lot of concern among industry analysts that bulk
foreclosure sales would push home prices down further, but it
appears that is already happening, as investors usually offer
10-20% below list price, while first time home buyers and current
homeowners are generally offering list. If the offers are
competitive, cash will prevail."

Existing home sales up

The National Association of Realtors said Friday that sales
increased 5% last month to a seasonally adjusted annual rate of
4.61 million, the best level since January 2011 and the third
straight monthly increase. For the year, sales totaled only 4.26
million. While that's up from 4.19 million the previous year,
it's below the 6 million that economists equate with healthy
housing markets. Sales are increasing at a time when the market
is flashing other positive signs. Mortgage rates are at
record-low levels. Homebuilders have grown slightly less
pessimistic because more people are saying they might be open to
buying a home this year. And home construction picked up in the
final quarter of last year. The median sales price rose 2.3% to
$164,500 in December. Still the housing market has a long way to
go before it is fully recovered from the housing bust four years
ago. In the last four years, home sales have slumped under the
weight of foreclosures, tighter credit and falling price. Fewer
first-time buyers, who are critical to a housing recovery, are in
the market for a home. Purchases by that group fell last month to
make up only 31% of sales. That's down from 35% in November. In
healthy markets, first-time buyers make up at least 40%. At the
same time, homes at risk of foreclosure made up a third of all
sales last month. In healthy markets, they comprise 10% of sales.
Investors are increasingly buying homes priced under $100,000.
Still, Sales rose across the country in December. They increased
on a seasonal basis by more than 10% in the Northeast, 8.3% in
the Midwest, 2.9% in the South and 2.6% in the West. The glut of
unsold homes declined to 2.38 million homes. At last month's
sales pace, it would take a nearly 7 months to clear those homes.
Analysts say a healthy supply can be cleared in about six

US and Europe to face more ratings cuts?

The string of sovereign debt downgrades in recent months could be
just the beginning. The US, Europe—even Germany—could face
further ratings cuts over the next three years, according to a
lengthy analysis this week by Citigroup. The European Union got
a slight reprieve late Friday as Standard & Poor's backed it's
triple-A/A-1+ rating on the EU. It had been under review and at
risk of a downgrade. The outlook remains "negative." In
announcing its decision, S&P said the EU "benefits from multiple
layers of debt-service protection sufficient to offset the
current deterioration we see in member states' creditworthiness."
The US is at the top of Citi's list for possible downgrades
because its debt and deficit troubles are unlikely to be resolved
with the political infighting in Washington. Some of the other
usual suspects also are on Citi’s list – the European
peripheral nations in particular such as Greece and Spain. But
even mighty Germany, seen as the continent’s most secure
economy, could face a downgrade as the sovereign debt crisis
escalates and a European recession spreads through the region.
“We expect a string of further ratings downgrades for
advanced-economy sovereign debt, and do not expect any ratings
upgrades,” Citi analysts Michael Saunders and Mark Schofield
wrote. That includes American debt, which Standard & Poor’s
downgraded in August in a move that set off a more than 600-point
one-day selloff in the Dow industrials.

Citi said it is keeping its outlook unchanged on US debt in the
near term but sees trouble looming for the American rating over
the next two to three years. Indeed, the list of potential
downgrades is ominous and serves as a reminder that while the US
equity markets seem conveniently to have forgotten about the
world’s debt troubles, some stern and punitive reminders are on
the way. Further downgrades for the US, and the initial
downgrade for Germany, could be a few years away. But in the
next six months, the ratings agencies are likely again to start
rattling their sabers, starting with the declaration of a Greek
default that is approaching a near-certainty in March. In fact,
in the next six months, Citi expects Moody’s to cut ratings for
Italy, Spain, Portugal and Greece, with the nascent recovery in
Ireland allowing it to be the only one of the “PIIGS” nations
to escape the downgrade scalpel. Additionally, France and
Austria are deemed likely for a “negative outlook,” while
Greece will be placed into either “selective default” or
“outright default.” Going out further, the next two to three
years are likely to see downgrades not only to the US but also to
Japan, France, Italy, Spain, Austria, Belgium, Finland, the
Netherlands and Portugal. - FHA steps up lender requirements

The Federal Housing Administration (FHA) on Friday announced new
measures to strengthen standards for the lenders it works with
– measures the agency says will help it better manage the risk
that comes with insuring mortgages against default. The new
regulations institute tighter requirements for lenders authorized
to insure mortgages on the agency’s behalf under the Lender
Insurance mortgagee program.FHA says these institutions will be
required to meet stricter performance standards to obtain and
maintain their approval status. More than 80% of all FHA forward
mortgages are insured through lenders participating in the Lender
Insurance program. FHA’s second mortgagee program – the
Direct Endorsement program – requires the agency’s approval
for endorsement. In order to be eligible to participate in the
FHA single-family programs as a Lender Insurance mortgagee, a
lender must be an unconditionally approved Direct Endorsement
mortgagee that is high performing. Under the new rule, a Lender
Insurance mortgagee must demonstrate a two-year seriously
delinquent and claim rate at or below 150% of the aggregate rate
for the states in which the lender does business. HUD and FHA
will review Lender Insurance mortgagee performance on an ongoing
basis to ensure participating lenders continue to meet the
program’s eligibility standards. The new rule also establishes
a process by which new HUD-approved lenders created through
corporate mergers, acquisitions, or reorganizations may be
considered for Lender Insurance authority. In addition, FHA has
shored up its processes for requiring lenders to cover potential
losses from insurance claims paid on mortgages that involve fraud
or that are found not to meet the agency’s underwriting
guidelines, which could force lenders to buy back more defaulted
loans. For those loans insured by Lender Insurance lenders, HUD
may require indemnification for “serious and material”
violations of FHA origination requirements and for fraud and
misrepresentation. In a separate notice to be published soon,
FHA plans to propose to reduce the maximum amount allowed for
seller concessions, in which the seller contributes a share of
the purchase price toward the buyer’s closing costs.

FHA says it will bring the maximum allowable amount to a level
more in line with industry norms. The current level exposes FHA
to excess risk by creating incentives to inflate appraised value,
the agency explained in a press statement. FHA says these
measures will help to protect and strengthen its Mutual Mortgage
Insurance Fund, which has fallen below the level mandated by
Congress, while enabling the agency to continue to fulfill its
mission of providing qualified borrowers with access to
homeownership. “Taken together, the changes announced today
will protect FHA’s insurance fund from unnecessary and
inappropriate risks while offering clear guidance to lenders
regarding HUD’s underwriting expectations,” said Carol J.
Galante, FHA’s acting commissioner. “FHA must continue to
strike a balance between managing risks to its insurance funds
and ensuring that FHA products are offered as widely as possible
to qualified borrowers,” Galante continued. “We hope that the
added clarity and certainty provided through these rules will
enable lenders to extend financing opportunities to larger
numbers of American families.”

Growth but few jobs

The National Association for Business Economics' industry survey
found that two-thirds of respondents expected no change in
employment at their companies over the first half of the year.
That was the highest share in recent quarters. Although the US
jobless rate fell to a near three-year low of 8.5% in December,
fewer businesses said they would hire more workers, compared with
the previous industry poll. The survey, which was conducted
between December 15 2011, and January 5 2012, found that 65% of
respondents expect gross domestic product growth to exceed 2%
between the fourth quarter of last year and the last quarter of
2012. That was higher than the 1.6% growth rate economists
polled by Reuters found. About two-thirds of the companies
surveyed said the European debt crisis would have little impact
on their sales over the first half the year, while 27% of
respondents said they expected to see a decline in sales of 10%
or less.

CMBS delinquency rate higher than 9% in 2011

The delinquency rate of loans in commercial mortgage-backed
securities (CMBS) bounced higher in December and remained above
9% all year. Delinquency rates were mixed across the five
commercial property types in December with hotel and multifamily
rates declining while office, retail and industrial rose.
Moody's Investors Service said the rate rose to 9.32% last month
from 9.27% in November and from 8.79% a year earlier. The
ratings agency said there were $3.7 billion of newly delinquent
loans in December, including Bank of America Plaza in Atlanta,
while $3.5 billion were resolved or worked out. The $1.4 billion
of new CMBS deals was more than offset by $5.5 billion of
seasoned loan dispositions and payoffs, pushing the CMBS universe
to $582.8 billion, analysts said. The $363 million loan that
went into arrears in Atlanta is the seventh largest delinquent
loan overall, according to Moody's. The delinquent rate in the
hotel sector fell to 12.96% from 13.54% a month earlier, while
multifamily declined to 14.44% from 14.88%, which remains the
highest rate among the core asset classes, Moody's said. Retail
delinquencies rose to 7.22% from 6.97% in November; industrial
climbed to 12.09% from 11.5%; and office increased to 8.65% from
8.39%. Moody's specially serviced loan tracker fell to 11.97% in
December from 12.1% the prior month.

Olick - robo signings turned political

"For over a year now, state attorneys general have been
negotiating some kind of settlement deal with the nations four
largest lenders, as well as several smaller ones. The settlement
pertains to faulty foreclosure processing, first uncovered in
October of 2010 and now commonly referred to as 'Robo-signing.'
Rather than dozens of lawsuits, the states initially were looking
to assess one great punishment on the lenders and thereby appease
borrowers who felt they were wronged. The banks were looking for
wider immunity from securitization issues, and that is largely
what has held up the negotiations for so long.

Now, suddenly, after umpteen 'we’re close to a deal's,
apparently we’re now really close to a deal, largely because
the State of the Union address is next Tuesday, and this is an
election year. So at a meeting of Mayors Wednesday, the Secretary
of Housing and Urban Development, Shaun Donovan, mentioned that a
settlement would include principal reduction for about a million
borrowers. 'With few other tools to help housing, the
administration sees the deal as a way to take credit for helping
underwater borrowers without exposing taxpayers to loss,' says
Jaret Seiberg at Guggenheim partners, noting that the deal may
not fully be in place by Tuesday, but a 'framework' could be
announced. 'If this deal does score enough political points, then
it will dampen calls for the administration to roll out more
housing help such as a mass refinancing. As we remain dubious
about the real impact of a deal, our view is that the
administration will face pressure this spring to do more. That
means more refinancings of GSE loans will still be on the table,'
he adds.

Of course we already know the basic framework of the deal, which
would involve up to $25 billion from the banks, though only a
small portion of that would be a cash settlement. The bulk of the
money would be used to do principal write downs, short sales, and
more aggressive loan modifications. Unfortunately, several key
states, including Massachusetts, California, New York, Delaware
and Nevada have expressed serious concerns about the deal
currently on the table, and some bank sources are telling us that
without California and New York, it’s hard to see how there
would be a deal. If there is a deal, beyond the politics, it
could have a larger effect on the state of the housing market and
its recovery.

Remember, this deal is about foreclosure processing, which has
been nearly stalled in many states. 'To that end, it will give
banks some increased certainty about their ability to foreclose
in those states that sign on to the agreement. As a result, we
may see foreclosures ramp up fairly quickly in those states,'
says Josh Rosner of Graham-Fisher. Rosner calls the deal
'somewhat nonsensical,' even without knowing the full details, as
he believes it offers no assurances to any state regarding
specific amounts of relief, not to mention leaving questions
about the credibility of the monitoring, oversight, compliance
and enforcement of the deal terms. 'The expected political
calculus is that the public will see the headline and will not
bother to watch the operationalization or follow-through,' says

My concern is about this principal reduction headline. Yes, the
banks processed foreclosures using improper methods, having one
person sign off on thousands of documents that were never read.
Yes, there was a huge breakdown in accountability and a huge lack
of attention paid to struggling borrowers. The trouble is, after
going over these cases, the bottom line is that the vast majority
of the foreclosures were and are valid. People didn’t pay their
mortgages. So now you’re offering cash back to these borrowers,
perhaps even their homes back, while others in the very same
position, who may have had their foreclosures processed
correctly, get nothing."

Will the Keystone pipeline get built after all?

Is the political controversy over the Keystone XL oil pipeline
project just a lot of hot air? Yesterday, after President Obama
rejected the project—which would carry oil from Canada to US
refineries in the South—the political finger-pointing in
Washington kicked into high gear. Republican Presidential
candidate Mitt Romney called the decision a “shocking” one
that will cost jobs and was just out to please environmentalists.
Fellow candidate Newt Gingrich went so far as to call it
“stunningly stupid.” analysts are suggesting, however, that
once the project’s builder, TransCanada, reapplies for the
permit with a new route, the pipeline will come online in 2014 as
the company expected all along—with no construction jobs lost.
“We view this announcement as politically driven and do not
believe that it precludes Keystone XL from eventually receiving a
Presidential Permit in early-2013, as the company previously
expected,” said Linda Ezergailis of TD Securities, in a note to
clients. “TransCanada continues to believe that Keystone XL
could enter service in late-2014. We note that this timeline is
unchanged from what the company presented at its investor day in
November 2011.” It's hard to see why a president would go
ahead with plans to mothball the pipeline when the alternative is
oil from the middle east, so maybe TranCanada has a point?

Homeowners not out of the woods

While housing reports this year have generally pointed to an
improving recovery in the real estate market, the growth remains
at an anemic pace, translating into choppy moves for housing
stocks for the foreseeable future. Homebuilders declined in 2011
for the third consecutive year amid disappointing real estate
market conditions. Following the decline, some analysts are
betting that the dismal performance would leave room in the New
Year for an eventual recovery. Meanwhile, homebuilders took a
breather Thursday, hurt by a weaker-than-expected housing starts
data, overshadowing the previous session's rally helped by a
strong builder sentiment index, as the market struggled to digest
and make sense of the industry's mixed results. The seasonal
trade for homebuilders typically takes place in November through
March. Meanwhile, UBS lowered its rating on D.R. Horton, Lennar
and Toll to “neutral” from “buy,” while slashing KBHome
and Meritage to “sell” from “neutral,” adding that the
rate of housing recovery won't be sufficient enough to justify
the sector upside. “Housing seems to be in recovery, but
it’s just not fast enough given what’s baked into the stocks
at this point,” said David Goldberg, analyst at UBS who
initiated the downgrades. For “more optimistic” investors,
however, UBS suggested focusing on higher beta names such as
Pulte Homes and Standard Pacific.

Markets wait for Greek talks

Financial markets were cautious Friday ahead of another round of
debt-reduction talks between Greece and its private creditors
that could determine whether Europe's debt crisis flares up
again. While meeting with debt inspectors from the European
Union, the European Central Bank and the International Monetary
Fund, the Greek government is also holding a third day of talks
with creditors over a deal to get them to reduce the value of
their Greek bond holdings. Greece is seeking to get creditors to
agree a euro100 billion ($129 billion) writedown. Heads of the
inspection team are meeting with Finance Minister Evangelos
Venizelos ahead of the next round of discussions with the
creditors. A deal is necessary if Greece is to get the next batch
of bailout cash that would prevent a devastating debt default —
Greece does not have enough money to cover a euro14.5 billion
bond repayment in March. Last October, Greece's partners in the
eurozone sanctioned a deal whereby private creditors would take a
cut in the value of their bond holdings to help lighten the
country's debt burden. Hopes for such a deal as well as a run of
successful European bond auctions and solid economic and
corporate news, not least from the US and China, have helped
shore up market sentiment in recent days. Many stock indexes have
risen to five-month highs, while the euro has clambered off
17-month dollar lows.

LPS "first look" mortgage report

Lender Processing Services, Inc. (NYSE: LPS), a leading provider
of integrated technology, data and analytics to the mortgage and
real estate industries, reports the following “first look” at
December 2011 month-end mortgage performance statistics derived
from its loan-level database of nearly 40 million mortgage

- Total US loan delinquency rate (loans 30 or more days past
due, but not in foreclosure): 8.15%
- Month-over-month change in delinquency rate: 0.0%
- Year-over-year change in delinquency rate: -7.7%
- Total US foreclosure pre-sale inventory rate: 4.11%
- Month-over-month change in foreclosure presale inventory rate:
- Year-over-year change in foreclosure presale inventory rate:
- Number of properties that are 30 or more days past due, but
not in foreclosure: (A) 4,101,000
- Number of properties that are 90 or more days delinquent, but
not in foreclosure: 1,792,000
- Number of properties in foreclosure pre-sale inventory: (B)
- Number of properties that are 30 or more days delinquent or in
foreclosure: (A+B) 6,167,000
- States with highest percentage of non-current* loans: FL, MS,
- States with the lowest percentage of non-current* loans: MT,

Easing could cost $1 trillion

The Federal Reserve is likely to step in with $1 trillion worth
of easing that could be announced as soon as this month,
according to a growing consensus of economists who see the recent
uptick in economic growth as unsustainable. With the Fed’s
Open Market Committee set to meet next week, expectations are
rising that the languishing housing market will drive the central
bank to buy up mortgage-backed securities. The goal of the
purchases will be to drive down interest rates even further from
current record-low levels, and, less obviously, to spur
confidence that more monetary tools remain to stimulate the
economy. Just a few months ago, market observers speculated that
another round of quantitative easing — QE3, in this case —
would be politically infeasible and probably unnecessary given
hopes for better growth in 2012. But with housing stuck in
neutral and a European recession on the horizon, economists
believe QE3 is all but certain.

Mortgage originations down 20% in 2011 at the four big banks
Mortgage originations by the nation's largest four banks fell
20.4% in 2011 to a combined $717 billion from $902 billion in
2010, according to HousingWire analysis of the company's
financial statements. Excluding Bank of America, overall mortgage
production among the big banks fell 6.3% in 2011. Citigroup's
home loan production remained flat throughout the year as it
wrote $63 billion worth of mortgages in 2011 after writing $62
billion in 2010. The 2% increase makes Citigroup the only bank of
the top four to increase mortgage origination throughout the
year. JPMorgan Chase's mortgage originations fell 6.4% to $146
billion from $156 billion in 2010. Wells Fargo, the nation's
largest mortgage lender, experienced a 7.5% slowdown in
production to $357 billion from $386 billion in 2010. BofA's
mortgage production cratered 49.1% to $152 billion from $298
billion in 2010. The Charlotte, N.C.-based bank reported $1.4
billion in profit for 2011, down 36% from earnings of $2.2
billion the prior year. The bank said the closing of its
correspondent lending channel and a declining market share cut it
into its production earnings.

Credit conditions in the US are loosening as 2012 begins,
according to Capital Economics. "We expect this to continue,
supporting home sales and putting a floor under house prices,"
analysts at the Toronto-based research firm said. "But any
improvement in credit conditions won’t be significant enough to
generate actual house price gains and could be rapidly reversed
if the fallout from a eurozone break-up is worse than we anticipate."
The nation's fifth largest bank, Ally Financial, has yet to report
fourth-quarter and 2011 results.

San Diego foreclosures and short sales in 2011

December home sales numbers in San Diego are a reflection of how
the market performed all year. About a third of all sales
involved foreclosures. Another 20 percent of transactions were
short-sales, homes sold for less than was owed on the mortgage.
The overall sales numbers were higher than a year ago, but still
more than 20 percent below the average number of transactions for
the month. There was a small burst of sales activity in December,
but not enough to boost the value of homes in the region. San
Diego has nearly 4 percent more sales when compared with December
a year ago, but the average price was down almost 5.5 percent.
"Prices continue to be weak because of the weak job growth and
the difficulties a lot of people have getting a loan to buy a
home," said Andrew LaPage of the real estate tracking firm Data
Quick. "There's still an emphasis in the market toward the lower
cost distressed properties." The median San Diego home price
fell just over 5 percent from December a year ago. The average
price was $315,000. That's down from $333,000 a year ago. "We
think there's still a lot of people sitting tight, waiting for
something to happen. Either a clear sign that prices have hit
bottom. Or the opportunity to qualify for financing," said

PPI down, core up

The U.S. producer price index (PPI) fell in December as companies
paid less for gasoline and vegetables, although higher prices for
light motor trucks pushed a measure of underlying inflation
higher. The PPI measures price changes before they reach
consumers, declined 0.1 percent in December. That follows a 0.3
percent rise the previous month and is the first drop since
October. Headline PPI actually fell 0.1 percent for the month,
but the core, which strips out volatile food and energy prices,
rose 0.3 percent, the most since July 2011. Excluding volatile
food and energy costs, so-called core wholesale prices rose 0.3
percent. It was the largest increase in five months. Higher
prices for pickup trucks, cars, and pharmaceuticals drove the
increase. Still, wholesale prices are trending lower. They
increased 4.8 percent in December compared to the same month a
year ago. That's the slowest annual increase since January and
down from a recent peak of 7.1 percent in July. The Fed projects
consumer price inflation will fall from about 2.8 percent in 2011
to roughly 1.7 percent this year. That's in the Fed's preferred
range for core inflation of about 1.7 percent to 2 percent.

Wholesale price inflation peaked last year and most economists
expect that it will continue to moderate. The prices of oil and
agricultural commodities such as cotton and corn have fallen
after spiking in early 2011. The decline in commodity prices
pushed down gas prices and enabled retailers to offer discounts
on many goods. That helped boost consumer spending, which makes
up 70 percent of economic activity. Consumer spending likely
grew at the fastest pace in a year in the final three months of
2011. Some economists estimate that it rose at a 3 percent annual
pace in the October-December quarter, up from a 1.7 percent rate
in the third quarter. As a result, overall growth may top 3
percent in the fourth quarter. That would be an improvement from
the 1.8 percent annual pace in the July-September quarter and 0.9
percent in the first six months of the year.

MBA - mortgage applications up

Mortgage applications increased 23.1 percent from one week
earlier (last week’s results included an adjustment for New
Year’s Day), according to data from the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Applications Survey for the
week ending January 13, 2012. The Market Composite Index, a
measure of mortgage loan application volume, increased 23.1
percent on a seasonally adjusted basis from one week earlier. On
an unadjusted basis, the Index increased 38.1 percent compared
with the previous week. The Refinance Index increased 26.4
percent from the previous week to its highest level since August
8, 2011. The seasonally adjusted Purchase Index increased 10.3
percent from one week earlier to its highest level since December
12, 2011. The unadjusted Purchase Index increased 28.4 percent
compared with the previous week and was 2.2 percent higher than
the same week one year ago.

The four week moving average for the seasonally adjusted Market
Index is up 5.99 percent. The four week moving average is up
1.96 percent for the seasonally adjusted Purchase Index, while
this average is up 7.00 percent for the Refinance Index. The
refinance share of mortgage activity increased to 82.2 percent of
total applications from 80.8 percent the previous week. This is
the highest refinance share since October 22, 2010. The
adjustable-rate mortgage (ARM) share of activity increased to 5.6
percent from 5.4 percent of total applications from the previous
week. “Interest rates dropped last week due to continuing
anxieties regarding the fragile economic situation in Europe,”
said Michael Fratantoni, MBA’s Vice President of Research and
Economics. Fratantoni continued, “With mortgage rates reaching
new lows, refinance volume jumped and MBA’s refinance index
reached its highest level in the last six months. Purchase
activity also increased as buyers returned to the market after
the holiday season.”

Natural gas prices down

Natural gas futures slumped to a 10-year low, as warm winter
weather dampens demand and pressures prices that are already
falling on record supplies. “This is a classic case of
oversupply,” said Daniel Yergin, chairman of IHS CERA. Natural
gas on the Nymex fell 6.8 percent Tuesday, finishing the day at
$2.4880 per million BTUs, its lowest settle since March, 2002.
“We’re behind on degree days. It’s been above normal in
terms of the temperature, and that has just collided with a
record amount of supply being produced and in storage. We’re
going to end the season with a record amount of gas in storage,
yet again,” said John Kilduff of Again Capital. Kilduff said
the storage estimates for the winter season’s end, March 31,
range from about 2 to 2.4 trillion cubic feet, well above the
average 1.5 trillion cubic feet. The Energy Department last week
reported natural gas supplies 17 percent above the 5-year
average. At the same time, December’s temperatures were well
above normal and milder-than-normal temperatures are expected to

Housing recovery unclear

The housing market is improving but it's not clear whether it has
hit its low yet, Wells Fargo Chief Financial Officer Timothy
Sloan said. Unlike JPMorgan Chase CEO Jamie Dimon, who said last
week the housing market has bottomed out, Sloan said "It's not
clear" whether that has happened but "I hope that is the case."
Earlier Tuesday, Wells reported earnings that beat expectations
on lower loan losses. Wells Fargo is the largest originator of
home loans in the U.S. Its mortgage banking income increased to
$2.4 billion in the fourth quarter, up from $1.8 billion in the
third, but down from $2.8 billion a year ago, as the bank
benefited from an increase in home loan refinancings. Loan
growth was broad-based, Sloan said, including in commercial
banking, commercial real estate, corporate banking and consumer
auto loans and credit cards. The bank's investment banking
business also had a strong quarter. "Your guess is as good as
mine in terms of where the markets are going to go," he said. "We
just want to make sure the right people are in front of our
clients to give real value to them...We need to be able to
demonstrate that we can deliver for our customers and
shareholders in any kind of market."

Obama's jobs panel pushes corporate tax

President Barack Obama's jobs council called yesterday for a
corporate tax overhaul, expanded domestic drilling and new
regulatory reforms, a set of proposals unlikely to provide a
quick fix for high unemployment or gain much traction in an
election year. Obama's Council on Jobs and Competitiveness has
generated dozens of ideas, many of them modest in scope, since it
was created last February. The president has acted on many of
them through his use of executive powers, but some of the larger
recommendations have lagged and the overall benefits remain
uncertain. While the council used two earlier reports to present
specific, mostly narrowly focused jobs proposals, the latest —
with the lofty title "Road Map to Renewal" — lays out a broader
strategy to promote manufacturing, education and innovation.
"Investing in our future, building on our strengths, and playing
to win — these are mantras we must adopt, along with the
specific policies and initiatives that back them up, if we are
going to renew our competitiveness," the report states.
Republicans, who accuse Obama of pursuing "job-killing" policies,
made clear they see the presidential panel as "job-creators"
echoing their own themes on taxes, energy and regulations. But
given the level of dysfunction in Washington, that may not
translate into legislative action any time soon. "With this
report, President Obama's own panel of experts has endorsed the
approach to job creation House Republicans have been pursuing for
more than a year," Republican House Speaker John Boehner said in
a statement.

Orlando short sales 12% higher price

The median price of homes sold in Orlando during December 2011
($118,000) was 12.38 percent higher than the median price in
December 2010 ($105,000). During 2011, Orlando's median price
climbed 24.34 percent from a low of $94,900 in January to a high
of $118,000 in December. The median price of "normal" sales that
closed in December 2011 was $159,900 (representing a decrease of
0.06 percent compared to December 2010). The median price for
short sales in December 2011 was $105,000 (an increase of 10.53
percent compared to December 2010), and the median price for
bank-owned sales in December was $80,000 (an increase of 6.67
percent compared to December 2010). Orlando Regional Realtor
Association (ORRA) members participated in 13.86 percent less
home sales in December of this year than in December of 2010:
2,125 and 2,467, respectively. At year's end, the number of
sales for all of 2011 (27,703) was 3.48 less than in all of 2010

In month-over-month comparisons, sales of foreclosed homes
declined 56.29 percent in December 2011 compared to December
2010. Short sales and "normal" sales both increased (by 24.41
percent and 14.15 percent, respectively) in December 2011
compared to December 2010. Normal sales (871) accounted for
40.99 percent of all transactions in December 2011, while short
sales (785) accounted for 36.94 percent and bank-owned sales
(469) made up the remaining 22.07. The Orlando average interest
has dropped to a new low once again. Buyers who purchased an
Orlando area home in December paid an average interest rate of
3.99 percent, which is the lowest since the ORRA began tracking
the statistic in January of 1995. Homes of all types spent an
average of 103 days on the market before coming under contract in
December 2011, and the average home sold for 92.40 percent of its
listing price. In December 2010 those numbers were 97 days and
94.45 percent, respectively.

New York's factory index up

The New York Fed's "Empire State" general business conditions
index rose to 13.48 from a revised 8.19 in December, topping
economists' expectations of 11.0. It was the highest level since
April 2011. New orders climbed to 13.70 from a revised 5.99,
while inventories also gained to 6.59 from minus 3.49. The
survey of manufacturing plants in the state is one of the
earliest monthly guideposts to U.S. factory conditions.
Employment gauges showed strength. The index for the number of
employees rose to 12.09 from 2.33 and the average employee
workweek index climbed to 6.59 from minus 2.33. Manufacturers
were also more optimistic about their outlook with the index of
business conditions six months ahead rising to its highest level
since last January at 54.87 from 45.61.

More failed HAMP trials

Mortgage servicers are putting more failed Home Affordable
Modification Program (HAMP) trials through foreclosure than they
were one year ago. According to Treasury Department data
released last week, 10.6% of the more that 615,000 canceled HAMP
trials completed the foreclosure process as of Nov. 1. That's
more than double the 4.4% of failed HAMP trials foreclosed on as
of November 2010. While foreclosures are increasing, alternative
modifications on these loans are dropping. Of the canceled HAMP
trials, 39.7% went through the bank's own private programs, down
from 45.4% over the same time period, according to Treasury data.
Foreclosure completions as a percentage of borrowers never
accepted into HAMP trials are lower but still increasing as well.
Of the 1.8 million borrowers denied a HAMP trial, 7.6% completed
the foreclosure process as of Nov. 1, up from 5% one year before.
Roughly 26.5% of these borrowers received alternative
modifications, which held flat over the last year.

The increase in more foreclosure completions on failed HAMP
trials occurred at nearly every large servicing shop
participating in the program. Citigroup saw the highest jump. Of
the 71,808 HAMP trials it canceled, roughly 13.5% completed the
foreclosure process as of Nov. 1, up from 3.1% one year ago. At
Ally Financial, the percentage increased to 12.8% from 6.4% over
the same period. At JPMorgan Chase, the increase went to 11.3%
from 6.2%. And at Bank of America, the largest servicer in the
program, 9.3% of failed HAMP trials went through foreclosure
compared to just 1.9% the year before. The highest percentage is
currently held by OneWest Bank. It foreclosed on more than 19% of
its roughly 20,000 failed HAMP trials, up from 10% last year.
Interestingly, Wells Fargo has one of the lowest percentages of
completed foreclosures on these mods at 6.7%, almost the exact
same percentage one year before.

According to the Office of the Comptroller of the Currency, 17%
of the 108,000 HAMP modifications began in the second quarter of
2010 went 60 or more days delinquent within one year. That's
compared to a 31% redefault rate for other private programs. D.
Corwyn Jackson, whose company The Corwyn Group helps to train
housing counselors for foreclosure prevention, said servicers are
getting mixed signals from the government-sponsored enterprises
Fannie Mae, which administers HAMP, Freddie Mac and other
stakeholders across the country. "The servicers are mandated to
stick to the agreed upon foreclosure time lines by state,"
Jackson said. "But other stakeholders such as nonprofit housing
counseling agencies across the nation are requesting servicers
during the negotiation to exhaust their loan workout options
before starting the foreclosure process."

The GSEs charge servicers for taking too long to complete the
foreclosure process under specific, state-by-state guidelines.
Servicers are expected to still consider the borrower for the GSE
programs, but time is of the essence. BofA, for example had to
pay Fannie and Freddie $1.3 billion in foreclosure delay
penalties in the first nine months of 2011. GSE policies and the
failed HAMP trial foreclosure rates is beginning to show in the
overall economy. Over the same time period covered by the
Treasury data, the shadow inventory of homes in foreclosure or on
the verge it has been declining. According to CoreLogic, roughly
1.6 million homes sit in this inventory, down from 2.1 million in
November 2010.

DOJ steps up ratings probe

The Justice Department (DOJ) has stepped up its investigation of
Standard & Poor's (S&P) mortgage bond ratings during the
financial crisis, the Wall Street Journal reported today. At
least five former S&P analysts have been contacted by federal
prosecutors in recent weeks, after some had not heard from
investigators for more than six months, the newspaper said. The
McGraw-Hill Cos Inc unit disclosed in September it had received a
Wells notice from the Securities and Exchange Commission
indicating it could face civil charges for its ratings of a 2007
mortgage bond deal called Delphinus 2007-1. It has not yet
disclosed any investigation by the DOJ, which the WSJ reported is
a civil probe. Prosecutors are examining whether S&P managers
pushed to weaken standards the company had set for rating the
mortgage deals, and whether the company followed its established
criteria in assigning ratings. The recent interviews lasted two
to three hours, and the former employees were told they would
likely by contacted again, the Wall Street Journal said. - vacant foreclosures cost money

A recent study from the Government Accountability Office (GAO)
found that non-seasonal vacant properties across the United
States rose 51 percent over the span of a decade, from nearly 7
million in 2000 to 10 million in April 2010. Ten states saw
vacancies go up by 70 percent or more as a result of high
foreclosure rates. Those with the largest increases over the last
decade were Nevada (126 percent), Minnesota (100 percent), New
Hampshire (99 percent), Arizona (92 percent), and Florida (90
percent). Georgia, Michigan, Colorado, Rhode Island, and
Massachusetts also experienced increases above 70 percent. The
elevated number of vacant homes carries with it a hefty price tag
for lenders that must resume ownership after foreclosure. GAO
found that in 2010, Fannie Mae and Freddie Mac reimbursed
servicers and vendors over $953 million for property maintenance
costs. However, it’s local governments, many of which are
already dealing with depleted funds, that are feeling
“significant” pressures from the rise in home vacancies,
according to GAO.

The agency notes that other studies have concluded vacant
foreclosed properties may reduce prices of nearby homes by as
much as $17,000 per property. As a result, municipalities report
being out millions of dollars in lost tax revenues. That’s in
addition to extra expenditures to put staff, systems, and
programs in place to ensure local property ordinances are met, as
well as costs associated with addressing public safety issues
posed by extended periods of vacancy or improper property
maintenance. GAO says the localities it studied are all engaged
in multiple strategies to try to minimize the costs and other
negative impacts that vacant properties create for their

Efforts range from simple data-gathering to more precisely
identifying vacant properties, to acquisition and rehabilitation
or, in some cases, demolition of abandoned properties. In
addition, some local governments have tasked servicers with
additional responsibilities for maintaining properties, amended
their code enforcement rules to establish greater incentives for
property maintenance, and established specialized housing courts
to address vacant property and other housing issues. These
strategies, however, face various challenges, particularly the
lack of financial support to effectively address such a
large-scale problem, according to GAO. As a result, governments
in many of the communities GAO examined are reaching out to
members of the community – including neighborhood groups and
private developers – in an attempt to leverage all available
resources. In addition, local governments have called for
increased federal funding and greater attention by federal
regulators to servicers’ role in managing vacant properties.

Foreclosures to take longer

Reviews of hundreds of thousands of foreclosure cases ordered by
regulators last year will take months longer to complete than
first expected, according to documents filed with federal banking
regulators. The delays could postpone compensation for some
homeowners harmed by improper foreclosure actions. The reviews
cover foreclosure actions in 2009 and 2010 by the nation’s 14
largest mortgage servicers, which handle payments for about 65%
of US mortgages. They are required by enforcement orders
announced by federal regulators in April. Under the deadlines
set in April, the reviews — which are being done by independent
consultants hired by servicers — should have been completed
this month. But reviews of Bank of America’s (BOA) foreclosure
cases could take until November, a letter that BOA’s consultant
filed with the Office of the Comptroller of the Currency (OCC)
indicates. BOA is the nation’s largest mortgage servicer, and
the Promontory Financial Group is its consultant. JPMorgan
Chase’s consultant, Deloitte & Touche, indicated it may need
about the same amount of time, according to its letter.

Review time frames have lengthened for other servicers, too,
because the detail, scope and complexity of the reviews weren’t
fully known in April, says OCC spokesman Bryan Hubbard. Some
companies may finish before others. Some may beat the timelines
in their letters. Some deadlines may get longer, Hubbard says.
The OCC says servicers should not wait until all reviews are done
to compensate homeowners. While 4 million cases are eligible for
reviews, consultants will sample only some for errors such as
unlawful foreclosures and excessive fees. Borrowers who faced a
foreclosure action on their primary home by one of the 14
servicers in 2009 or 2010 are eligible for reviews. Anyone
eligible who asks for a review by the April 30 deadline will get
one, the OCC says.

Consumer sentiment up

The Thomson Reuters/University of Michigan preliminary January
reading on its overall index of consumer sentiment rose to 74.0
from 69.9 in December for the fifth month of gains and the
highest level since May 2011. The report topped expectations of
71.5 and was in contrast to December's weaker-than-expected
retail sales reported on Thursday. Thirty-four% of consumers
polled in the consumer confidence survey said they had heard of
recent job gains, a record high in the survey's history and well
above December's 21%. "The data suggest a stronger consumer
spending outlook, rising to about a 2.1% gain in 2012," survey
director Richard Curtin said in a statement. But consumers still
lacked confidence in government economic policies with the
majority rating policies unfavorably for the sixth month in a
row. Americans also remained dour on their personal finances
with just 24% expecting their finances to improve in January,
slightly below 25% last month. The survey's barometer of current
economic conditions rose to the highest since February at 82.6
from 79.6, while its gauge of consumer expectations gained to
68.4 from 63.6.

2013 for housing recovery?

A poll of 23 economists and analysts found a consensus for no
change in the S&P/Case-Shiller home price index in 2012, compared
with a median 0.3% decline that was forecast in the last poll in
November. Many say that a recovery in the housing market is a
key requirement for any vigorous rebound in the world's largest
economy. The spectacular collapse in US housing, which sent
average prices plummeting by a third, was the trigger for the
2008-09 financial crisis and subsequent recession. The meager
1.5% gain expected in 2013 will offer little comfort to the
millions of Americans trapped in negative equity — owing more
to their mortgage lender, and in some cases much more, than their
houses are worth. "I think we are seeing stabilization, but
unfortunately it's stability at the bottom," said Lindsey Piegza,
economist at FTN Financial, describing the grinding halt to
several years of relentless price declines. The average price of
a US home is currently around where it was nine years ago, and
the most recent data, from October, showed price declines still

The market is still under pressure from an excess of homes up for
sale. Fifteen of 20 respondents said monthly foreclosures should
subside this year, while five didn't see any let-up until 2013.
Among 20 respondents, 15 said they expect foreclosures to ease
some time this year, while five said it would not happen until
2013. Gains in home sales and new home construction in November,
and recent improvement in homebuilder sentiment, added only a
touch of optimism at the end of last year. Still, while the gain
expected over the next two years is tiny compared with the more
than 30% plunge from the peak in 2006, it is still a more cheery
outlook than in some other parts of the world. A recent Reuters
poll predicted British home prices, which have not dropped
anywhere near as far as they have in the US, will slip 1.7% this
year. In China, they are expected to fall 10 to 20%.

Excess regulations hamper economy

Regulatory policies are badly undermining the economic objectives
of governments around the globe by hampering bank activity,
JPMorgan Chase chief executive Jamie Dimon said in a conference
call discussing fourth-quarter earnings Friday morning.
“Regulatory policy is completely contradictory to government
objectives,” Dimon said, citing restrictions on trading and new
capital regulations as regulatory sources of slower economic
growth. Dimon said that although regulators have provided
additional clarity on new capital rules, the clarifications are
have demonstrated that the capital rules are “bad.” He noted
that higher capital requirements have made risk weighting even
more important for banks. Under international capital standards,
different kinds of bank assets receive different capital
treatment, a practice known as risk weighting.

Dimon also criticized the so-called Volcker rule banning
proprietary trading. He warned that if the rule is not carefully
crafted, it could limit not just prop trading but market making.
“The United States has the widest and deepest and most
transparent capital markets in the world,” Dimon said. “And
the most liquid. If you lose liquidity because you lose market
making, you cost investors money.” He said that pension funds,
retirees, and other large investors could lose out if
restrictions on trading go too far. “We have to be very
careful that we don’t destroy that [market making] as we try to
limit — put a fair limit — on proprietary trading,” Dimon

Fitch downgrades Merrill mortgage securities

Fitch Ratings downgraded four classes of Merrill Lynch Mortgage
Trust securities certificates backed by commercial real estate
because the underlying loans are expecting losses. At the same
time, 17 classes of loans in the same series of securities were
affirmed by the ratings giant. Fitch specifically classified 76
loans as mortgages of concern. About 25 of those 76 are specially
serviced loans. The entire loan pool subjected to the downgrade
had an aggregate principal balance of $2.2 billion at the end of
December, compared to $2.5 billion at issuance. Of those loans
in special servicing, 16 are real-estate owned, three are in
foreclosure, another three are delinquent and 1% are current.
One of the largest contributors to the expected losses in the
pool is a three-story office building in Scottsdale, Ariz. The
loan was moved into special servicing in October of 2009 when a
large tenant that fully occupied one of the buildings terminated
its lease and vacated the premises. As of mid-last year, the
building's occupancy rate stood at 62%. A hotel located in
Tampa, Fla., also is contributing to uncertainty over the pool of
loans with a special servicer saying it would like to pursue a

Pushback on Massachusetts bill.

Homeowners facing foreclosure in Massachusetts should have a day
in court before banks cast them out of their homes, advocates
argued Wednesday, calling on lawmakers to make Massachusetts the
last New England state that requires judicial review of
foreclosures. But real estate attorneys pushed back, contending
that the Massachusetts court system is already overburdened –
the victim of repeated budget cuts and increased caseloads –
and adding foreclosure cases to its docket would be overwhelming.
Christopher Pitt of the Real Estate Bar Association of
Massachusetts said that the state Land Court processed 30,000
cases in 2010. If the court were required “to hold a mandatory
judicial proceeding as a precondition to every mortgage
foreclosure,” he said, the backlog would “overwhelm the
court’s ability to handle these cases in a timeframe that is
acceptable to anybody.” He also noted that tenants could use
the process to delay foreclosure, taking issue with every aspect
of a bank’s petition. “There are not the resources on any
level of the trial court to handle that level of flooding,”
Pitt said. The resistance from the attorneys – whose arguments
were echoed by Massachusetts bankers – underscored a challenge
facing lawmakers, who have slashed the judiciary’s budget but
have also cast themselves as protectors of homeowners who have
been taken advantage of by predatory lenders. The debate played
out at a hearing of the Judiciary Committee at in a basement
hearing room at the capitol.

Jobless claims up

The Labor Department said today that applications jumped by
24,000 to a seasonally adjusted 399,000, the most in six weeks.
That followed three months of steady declines that brought
applications to the lowest level in more than three years.
Applications typically soar in the first two weeks of the year.
That's because many companies lay off temporary workers who were
brought on to help during the holidays. The department tries to
adjust for those patterns. But the task is difficult because the
data can be volatile. The four-week average, which attempts to
smooth such fluctuations, also rose, to 381,750. It had fallen in
the previous week to a three-and-a-half-year low. When
applications drop below 375,000 — consistently — that
generally signals hiring is strong enough to reduce the
unemployment rate. Prior to last week's spike, applications had
been below 375,000 for three of the past four weeks. The
unemployment rate fell in December to 8.5 percent, a three-year
low. Employers added 200,000 net jobs, double November's 100,000
gain. The economy gained 1.6 million jobs last year, up from
940,000 in 2010. Economists forecast roughly 1.9 million more
jobs will be added this year, according to a survey by The
Associated Press.

Foreclosures down in 2011

RealtyTrac said in a report today that foreclosure filings, which
include default notices, scheduled auctions, and bank
repossessions, slid by 34 percent in 2011, the lowest level since
2007, just as the housing market was starting to crumble.
RealtyTrac said there were filings on 1,887,777 homes last year.
Bank seizures of homes fell to 804,423 from 1,050,500 in 2010,
also marking the lowest level in four years. Nevada ranked as
the state with highest foreclosure rate for the fifth year in a
row, with one in 16 Nevada homes receiving at least one
foreclosure filing in 2011. Even so, Nevada saw a 31 percent
decrease in foreclosure activity for the year. The length of
time for foreclosure processing continued to increase in the
final quarter of the year. Homes took on average 348 days to move
through the process, up from 336 days in the third quarter and
305 days in the fourth quarter of 2010. Foreclosures took the
longest in New York state, where homes foreclosed in the fourth
quarter took an average 1,019 days to complete the process.
RealtyTrac also released foreclosure activity for December, which
fell to a 49-month low of 205,024 homes, down nearly 9 percent
from November. But bank repossessions rose 10 percent to 61,774.

IRS accused of "bait and switch"

The Internal Revenue Service has persuaded U.S. taxpayers to
disclose hidden offshore bank accounts but then sometimes failed
to cap the penalties, as promised, an agency watchdog said on
Wednesday, accusing the IRS of "bait and switch." The Taxpayer
Advocate Service, an oversight arm of the IRS, wrote in its
annual report to Congress that a series of IRS voluntary
disclosure programs allowing wealthy Americans to come forward
and disclose their hidden accounts in exchange for reduced
penalties had caused some taxpayers to pay more than they had
been led to believe was required. Such taxpayers are typically
those who have inherited accounts or work overseas. "The IRS's
offshore voluntary disclosure program bait and switch may
undermine trust for the IRS and future compliance programs," Nina
Olson, the national taxpayer advocate who heads the service,
wrote in the report. In reply, IRS spokesman Dean Patterson said
the IRS strongly disagreed with what it said were inaccurate
"bait and switch" characterizations. "If at any time during the
certification process, a taxpayer disagreed with the results
provided for under the program the taxpayer could opt out of the
program and make their case for lower penalties. This option is
still available today."

On Monday, the IRS said it was reopening a voluntary disclosure
program for taxpayers hiding money in offshore bank accounts,
many in Switzerland, the global capital of offshore wealth.
Previous IRS programs, in 2009 and 2011, brought in more than
$4.4 billion in unpaid taxes and penalties from 33,000 taxpayers.
Tax lawyers see the renewal of the program as a sign that the
agency is again preparing to receive scores of names of wealthy
Americans who are clients of Swiss banks, under a broad
investigation of the Swiss banking industry. Olson wrote that
ordinarily the penalty on taxpayers for nonwillful, meaning
accidental, failure to file a record of foreign bank and
financial accounts, or Fbar, was capped at $10,000. By contrast,
willful failure to file an Fbar ordinarily carries a draconian
penalty, of 50 percent of the highest account balance for each
year covered. During the first voluntary disclosure program in
2009, the IRS offered a break, capping the maximum penalty at 20
percent. A program in 2011 raised the cap to 25 percent. The
problem, Olson wrote, is that in 2009, in a written comment known
throughout the tax world as "FAQ 35," the IRS also said it would
never assess a penalty greater than what the law would permit.
Then in February 2011, the IRS said it would no longer entertain
arguments from taxpayers that their compliance was not willful.

Scott Michel, a tax lawyer at Caplin & Drysdale, said many tax
lawyers representing Americans with hidden accounts had
interpreted the original comment to mean that if a taxpayer
argued that he had not willfully, or intentionally, violated the
law, he would not have to pay even the reduced penalties of 20
percent or, later, 25 percent but instead would pay the maximum
of $10,000. Scores of taxpayers, many with inherited
Holocaust-era accounts, made the argument, he said. But the
February 2011 provision halted that activity, he said. "IRS
agents would even tell you that if you raised the non-willfulness
argument, you were in substance dropping out of the program,
leaving them free to impose maximum penalties," Michel said. "So
pretty much from the beginning, practitioners viewed FAQ35 as an
empty promise."

CFPB releases standards

The Consumer Financial Protection Bureau (CFPB) released details
yesterday on how its examiners will assess the underwriting risk
of mortgage lenders that offer non-traditional or subprime loan
products. The agency outlined the procedures that its examiners
will perform to evaluate bank and non-bank mortgage
originators’ policies and procedures, assess whether
originators are compliant with applicable laws and identify risks
to consumers. If a lender offers non-traditional or subprime
loan products and also offers loans that have two or more risky
characteristics, the examiners must determine whether the
increased risks are taken into account as part of the
underwriting policies. They must also examine whether any
mitigating factors are required for approval and whether actual
underwriting practices conform with policies.

According to the examiner guidelines, risky characteristics
include: limited or no documentation of income, assets and/or
employment; simultaneous second lien; negative amortization,
option payment or interest-only features; introductory rate 200
basis points or more below fully-indexed rate; and balloon
clauses. "The mortgage market cannot work well for consumers if
the spotlight shines only on one part of it, while the rest is
left in darkness," said CFPB director Richard Cordray said in a
statement. "Our supervision program will illuminate the entire
marketplace by making nonbanks play by the same rules as the
banks." The Dodd-Frank Wall Street Reform and Consumer
Protection Act significantly reformed gaps in federal supervision
of the mortgage market by providing the CFPB with authority to
supervise a range of mortgage participants. Other details that
examiners must investigate are whether the compensation systems
for underwriters (whether in-house or contracted) affects their
incentives concerning the speed and quality of their
underwriting. In addition, they must determine whether the lender
frequently uses exceptions to override underwriting decisions in
order to allow a greater volume of loans into the pipeline.

BOA short sale program to expand?

Bank of America's (BOA) cash-back incentive, which tempted
delinquent borrowers to do a short sale over a lengthy
foreclosure, ended Dec. 12 with mixed reviews. The Florida-only
program offered between $5,000 and $20,000 in relocation expenses
to qualified homeowners who agreed to vacate their homes through
a short sale in lieu of the average two-year foreclosure process.
But as of early December, only about 3,000 homeowners of 20,000
solicited by the bank had expressed interest in the plan, which
one real estate consultant said was unthinkable before the
robo-signing scandal heightened the foreclosure chaos. "A year
ago, banks weren't making offers like this. Now, it's a complete
reversal in that they are proactively soliciting short sales,"
said Jack McCabe, chief executive of McCabe Research & Consulting
in Deerfield Beach. "They are offering unbelievable deals."

Realtors say banks, including Wells Fargo and JPMorgan Chase,
began offering cash incentives about six months ago to homeowners
who agree to do short sales. With foreclosures taking an average
of 749 days in Florida, according to a November RealtyTrac
report, it's cheaper to pay off an owner than take them to court,
Realtors say. BOA spokeswoman Jumana Bauwens said she couldn't
comment on concerns unless they dealt with a specific case, but
that the company was "pleased" with the homeowner response.
Bauwens said Florida was chosen to test the program because of
its high number of foreclosures. If it's ultimately deemed
successful, it could be expanded to other states. To qualify,
homeowners had to submit their short sales for approval by Dec.
12 - an extended deadline from an original Nov. 30 date. The
homes could not have offers on them already, and the closing
needed to occur before Aug. 31.

Ford hits 2 million mark in 2011

The Ford brand passed the 2-million mark, said Erich Merkle, Ford
US sales analyst. Ford's small cars sales posted an increase of
more than 20% this year, while its utility vehicles hit a
30-percent gain, the company said. Overall, including its
Lincoln luxury brand and now-defunct Mercury brand, Ford company
sales were up about 11% through November, and the Ford brand's
sales were up about 18%. As gasoline prices rose in 2011,
customers continued to move toward smaller, more fuel-efficient
vehicles. In recent years, Ford has emphasized fuel efficiency,
including adding its "EcoBoost" engines that include
turbocharging and fewer cylinders, particularly on utility
vehicles and pickup trucks. US auto sales in December are
expected to top 13 million on an annual rate, J.D. Power and
Associates and LMC Automotive said. Once again, as it has each
year for more than three decades, the Ford F-Series pickup trucks
are the best-selling vehicle in the US market. Through November,
Ford sold 516,639 F-Series pickup trucks, according to Autodata.

Olick - housing's new hope

"I'm not sure if it's that usual New Year's Eve optimism evoked
by the generic philosophy that the grass is always greener on the
other side of the calendar year, or perhaps the emotional need to
dig ourselves out of what has surely been one of the more
lugubrious periods in the US economy, but there is some hope in
housing. A few positive readings in home sales and housing
starts recently, topped off by today's 7.4% monthly jump in
contracts to buy existing homes, are fueling what I dare say is a
spark, albeit not a fire. They are also managing to trump what
was a particularly opposing reading in home prices from the
number crunchers at S&P/Case-Shiller this week. Don't worry, I'm
not going to dump a bunch of coal on the numbers and claim
they're all spurious in some way; I'm all prepared to be
munificent, while chary (did I mention my new year's resolution
is to improve my family's vocabulary, as well as banish 'like'
from my kids' lexicon.) I will note that even the Realtors, while
touting affordability and pent-up demand, note that many of these
new signed contracts are the result of delayed transactions.
'Contract failures have been running unusually high,' notes
National Association of Realtors chief economist Lawrence Yun.
'Some of the increase in pending home sales appears to be from
buyers recommitting after an initial contract ran into problems,
often with the mortgage,' he said.

Then there is a big story in the Wall Street Journal [on Friday]
of hedge funds putting their money back in housing, suggesting
that while the numbers aren't all there for a big win, these
funds are usually ahead of big market shifts, so the housing
surge must be on its way. I've spoken to some of these hedge fund
types as well, and they seem to be playing on the surging rental
market for now, getting the bargains but not expecting any big
'flipping' returns any time soon. 'Bottom line, whether due to
even lower prices, historically low mortgage rates, falling
inventory and a better tone to the labor market or a combination
of all, the housing market is showing signs of stabilizing,' says
Peter Boockvar at Miller Tabak. 'I say stabilize instead of
bottom, as its too early to make that claim just yet with still a
huge amount of foreclosures that hasn't worked its way through
the judicial system and prices that haven't likely stopped going
down as a result.' Some are predicting that foreclosures will
push home prices down another five to ten% before hitting a true

In addition, those rock-bottom mortgage rates that everyone is
touting this week may be heading up, as the conservator of Fannie
Mae and Freddie Mac today directed the two mortgage behemoths to
inform servicers that guarantee fees would rise ten basis points
next week. That, if you recall, is to pay for the temporary
extension of the payroll tax cut. Yep, that money heads to the US
Treasury, not to the troubled balance sheets of Fannie and
Freddie. This accused nostrum will likely raise rates a tad, but
rates are still close to historical lows. And we should remember
that. It's all relative. Are things getting a bit better?
Probably. I heard (or read…can't remember) someone today say
that housing has gone from a negative to a nothing for the US
economy. So when we tout and rave about today's pending home
sales numbers, we mustn't forget where we've been: 'It’s not
going to keep 2011 from being the worst on record for new home
sales, for single family permits and single family housing
starts. Next year is going to be better, but that’s not saying
much because this has been the worst year, probably since 1945,'
said IHS Global Insight's Patrick Newport. In other words,
housing ain't exactly fecund, but it's at least inching off life

Employers offer weird benefits

Pet insurance, at-your-desk meditation services, jewelry
discounts and funeral planning — from the quirky to the somber,
workplaces are providing a range of unique benefits in 2012. The
options come as many firms try to placate employees frustrated by
pay cuts, heavy workloads, high health insurance costs and
reduced 401(k) matches. "Companies are trying to have it feel
like it's not one big take-away," said John Bremen, a managing
director at employer consultancy Towers Watson. "They are trying
to find ways to appeal to the workforce." Many voluntary
benefits — such as reduced-price computers and pet insurance
due to group-buying discounts — won't gouge a corporate budget.
"On the employer side, there's a recognition that they can't
always add to the benefits program in a way they have in the
past," said Ronald Leopold, national medical director at MetLife.
"But they want to offer employees different things and a broader
set of (choices)."

Among the many options offered: free tickets to theme parks,
cellphone plan discounts and at-work massages. Benefits at drug
manufacturer Allergan include adoption assistance and auto
insurance discounts. It also has a free concierge service for
workers to acquire theater tickets, drop off laundry and get
restaurant reservations. Firms such as S.C. Johnson, TD Bank and
Travelocity provide discounted health coverage for workers' pets
through Petplan Pet Insurance. Petplan "has seen tremendous
growth in this area of voluntary benefits," co-CEO Chris Ashton
said. "In this struggling economy, employers are increasingly
looking for low-cost options to keep their employees happy."

WSJ - 2011 ends with near record mortgage rate lows
Average fixed mortgage rates in the US over the past week
finished the year near all-time lows, with the 30-year home loan
at 3.95%. According Freddie Mac's weekly survey of mortgage
rates, the rate for a 30-year fixed-rate mortgage has been at or
below 4% for the past nine consecutive weeks and only twice in
2011 did it average above 5%. The 30-year fixed-rate mortgage
averaged 3.95% for the week ended Thursday, up from 3.91% the
previous week and below 4.86% a year ago. Rates on 15-year
fixed-rate mortgages averaged 3.24%, up from 3.21% last week and
below 4.20% a year earlier. Five-year Treasury-indexed hybrid
adjustable-rate mortgages, or ARM, averaged 2.88%, up from 2.85%
yet below 3.77% of a year ago. One-year Treasury-indexed ARM
rates averaged 2.78%, up from 2.77% in the prior week and below
3.26% last year. To obtain the rates, 30-year and 15-year
fixed-rate mortgages required payments of 0.7 percentage point
and 0.8 percentage point, respectively. Five-year and one-year
adjustable rate mortgages required an average payment of 0.6
percentage point. A point is 1% of the mortgage amount, charged
as prepaid interest.

See you at the top!
Chris McLaughlin


Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.
(subscribe to this newsletter)


About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit

* Owner of one of Florida's largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris' 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

Foreclosures up in New York

In the New York metro area, the foreclosure rate rose to 7.5% in
June, up 2.1 percentage points from the previous peak in December
2009, according to, a joint project by
the Local Initiatives Support Corp., the Urban Institute and the
Center for Housing Policy. The rate is up 3.7 percentage points
from March 2009, when the group started tracking the data in 100
US metro areas. “New York is a judicial state, so it takes a
long time for properties that enter foreclosure to exit the
process,” said Rob Pitingolo, a research assistant for Urban
Institute. “The backlog of foreclosures in the system is
driving the foreclosure rates up.” Judicial states require a
lengthy and formal court proceeding to carry out a foreclosure,
and in New York that process can take up to two years for a loan
to complete foreclosure, according to experts. "At the current
pace of foreclosure sales, we are looking at a process that could
take decades to complete,” said Leah Hendey, a research
associate at Urban Institute, in a statement. “It is critical
that the status of these properties be resolved quickly if we
want to stabilize communities and housing markets."

The increasing foreclosure rate contributed to New York's serious
delinquency rate of 10.8% in June, much higher than the average
9.3%. In fact, while the serious delinquency rate has improved
across the largest metro areas in the nation, falling 1.1
percentage points from its December 2009 peak of 10.4%,
delinquency got worse in New York, where the rate rose 0.6
percentage points. The serious delinquency rate covers first-lien
mortgages in foreclosure as well as loans that are delinquent for
90 or more days. The good news is fewer homeowners in the New
York metro area are falling behind on their mortgage payments,
according to the data. The New York area's 90-day-plus
delinquency rate dropped 1.2 percentage points to 3.4% in June,
compared with the same time a year ago. Delinquent loans in the
New York metro area came in slightly below the average rate of
3.7%. The 90-day-plus delinquency rate represents the percentage
of all mortgages that have not yet entered a foreclosure but are
90 or more days overdue.

Treasury to charge banks for risk monitoring

The US Treasury Department plans to start charging large banks a
fee to cover the costs of the financial risk council it leads and
a research office tasked with measuring threats to financial
markets. The Financial Stability Oversight Council and the
Office of Financial Research were created by the 2010 Dodd-Frank
financial oversight law, which instructs the government to bill
banks for their operations. On Thursday the Treasury Dept.
released a proposed rule that would apply to banks with more than
$50 billion in total assets, starting in the middle of next year.
The department is proposing charging these banks a flat rate
that would be applied to an institution's total consolidated
assets, and would be collected twice a year. The department has
yet to announce the specific fee banks will be charged because
the budget for the council and research office will not be known
until President Barack Obama releases his fiscal 2013 budget
proposal early next year. The Treasury Dept. said it plans to
have a final fee rule out no later than the end of May and will
let banks know what their tab is in June. The fees will first be
collected in July. Treasury said the collected fees will be
enough to cover six months of OFR and FSOC operating expenses and
12 months of capital expenses. The proposed rule will be subject
to 60 days of public comment.

Olick - housing's new hope

"I'm not sure if it's that usual New Year's Eve optimism evoked
by the generic philosophy that the grass is always greener on the
other side of the calendar year, or perhaps the emotional need to
dig ourselves out of what has surely been one of the more
lugubrious periods in the US economy, but there is some hope in
housing. A few positive readings in home sales and housing
starts recently, topped off by today's 7.4% monthly jump in
contracts to buy existing homes, are fueling what I dare say is a
spark, albeit not a fire. They are also managing to trump what
was a particularly opposing reading in home prices from the
number crunchers at S&P/Case-Shiller this week. Don't worry, I'm
not going to dump a bunch of coal on the numbers and claim
they're all spurious in some way; I'm all prepared to be
munificent, while chary (did I mention my new year's resolution
is to improve my family's vocabulary, as well as banish 'like'
from my kids' lexicon.) I will note that even the Realtors, while
touting affordability and pent-up demand, note that many of these
new signed contracts are the result of delayed transactions.

'Contract failures have been running unusually high,' notes
National Association of Realtors chief economist Lawrence Yun.
'Some of the increase in pending home sales appears to be from
buyers recommitting after an initial contract ran into problems,
often with the mortgage,' he said. Then there is a big story in
the Wall Street Journal today of hedge funds putting their money
back in housing, suggesting that while the numbers aren't all
there for a big win, these funds are usually ahead of big market
shifts, so the housing surge must be on its way. I've spoken to
some of these hedge fund types as well, and they seem to be
playing on the surging rental market for now, getting the
bargains but not expecting any big 'flipping' returns any time
soon. 'Bottom line, whether due to even lower prices,
historically low mortgage rates, falling inventory and a better
tone to the labor market or a combination of all, the housing
market is showing signs of stabilizing,' says Peter Boockvar at
Miller Tabak. 'I say stabilize instead of bottom, as its too
early to make that claim just yet with still a huge amount of
foreclosures that hasn't worked its way through the judicial
system and prices that haven't likely stopped going down as a
result.' Some are predicting that foreclosures will push home
prices down another five to ten% before hitting a true bottom.

In addition, those rock-bottom mortgage rates that everyone is
touting this week may be heading up, as the conservator of Fannie
Mae and Freddie Mac today directed the two mortgage behemoths to
inform servicers that guarantee fees would rise ten basis points
next week. That, if you recall, is to pay for the temporary
extension of the payroll tax cut. Yep, that money heads to the US
Treasury, not to the troubled balance sheets of Fannie and
Freddie. This accused nostrum will likely raise rates a tad, but
rates are still close to historical lows. And we should remember

It's all relative. Are things getting a bit better? Probably. I
heard (or read…can't remember) someone today say that housing
has gone from a negative to a nothing for the US economy. So when
we tout and rave about today's pending home sales numbers, we
mustn't forget where we've been: 'It's not going to keep 2011
from being the worst on record for new home sales, for single
family permits and single family housing starts. Next year is
going to be better, but that's not saying much because this has
been the worst year, probably since 1945,' said IHS Global
Insight's Patrick Newport. In other words, housing ain't exactly
fecund, but it's at least inching off life support."

Oil up

Oil prices inched higher toward $100 a barrel Friday amid
encouraging signs the US economy is slowly improving and
continuing tensions between Western powers and Iran. By early
afternoon in Europe, benchmark crude for February delivery was up
13 cents to $99.78 a barrel in electronic trading on the New York
Mercantile Exchange. The contract added 29 cents to settle at
$99.65 in New York on Thursday. In London, Brent crude was down
48 cents at $107.53 a barrel on the ICE Futures exchange. Crude
has traded near $100 since mid-November after jumping from $75 in
October as investors eye growing evidence the US economy could
avoid a recession next year. The government reported Thursday
that claims for jobless benefits fell to a four-week average of
375,000, the lowest level in three and a half years.

Energy trader Blue Ocean Brokerage said oil prices would likely
eventually jump by about $50 if Iran, OPEC's second-biggest crude
exporter, tried to close the strait. "Let's start with an easy
$20 spike, then add in a risk premium for insurance costs,
delays, costs to push oil through alternative routes and the
obvious loss of 3.5 million barrels a day from Iran," energy
trader Blue Ocean Brokerage said in a report. "Crude oil prices
have managed to outperform the commodity complex this year, with
geopolitical risk premiums and seemingly resurgent US economy
offsetting a worsening situation in the eurozone," said analysts
at Sucden Financial in London. "With regard to Iranian tensions
specifically, an EU foreign ministers' meeting on Jan. 30 to
consider further sanctions on the country will likely prove an
important focus in early 2012 trade." Trading volume was low
this week as many investors take vacations around the Christmas
and New Year's Day holidays. In other Nymex trading, heating oil
rose 0.4 cent to $2.9241 per gallon and gasoline futures lost 0.7
cents at $2.6624 per gallon. Natural gas futures were down 2.2
cents to $3.005 per 1,000 cubic feet.

NAR - pending home sales up

Pending home sales continued to gain in November and reached the
highest level in 19 months, according to the National Association
of Realtors (NAR). The Pending Home Sales Index (PHSI), a
forward-looking indicator based on contract signings, increased
7.3% to 100.1 in November from an upwardly revised 93.3 in
October and is 5.9% above November 2010 when it stood at 94.5.
The October upward revision resulted in a 10.4% monthly gain.
The last time the index was higher was in April 2010 when it
reached 111.5 as buyers rushed to beat the deadline for the home
buyer tax credit. The data reflects contracts but not closings.
The PHSI in the Northeast rose 8.1% to 77.1 in November but is
0.3% below November 2010. In the Midwest the index increased 3.3%
to 91.6 in November and is 9.5% above a year ago. Pending home
sales in the South rose 4.3% in November to an index of 103.8 and
remain 8.7% above November 2010. In the West the index surged
14.9% to 121.2 in November and is 2.9% higher than a year ago.

The Pending Home Sales Index is a leading indicator for the
housing sector, based on pending sales of existing homes. A sale
is listed as pending when the contract has been signed but the
transaction has not closed, though the sale usually is finalized
within one or two months of signing. The index is based on a
large national sample, typically representing about 20% of
transactions for existing-home sales. In developing the model for
the index, it was demonstrated that the level of monthly
sales-contract activity parallels the level of closed
existing-home sales in the following two months.

Foreclosure backlog to take "decades" to clear

The number of seriously delinquent mortgages in the nation's
largest metropolitan areas slowed this year, according to a new
study from the Urban Institute. But foreclosures remain a burden
on the housing market, prompting the policy research group to
call for a resolution to the housing crisis to ensure the
foreclosure backlog is cleared out in a reasonable time period.
The institute said the serious delinquency rate in the 100
largest metro areas slowed to 9.3% in June from 10.4% in December
2009, according to data from The Urban
Institute said the serious delinquency rate is classified as the
share of loans in foreclosure, plus all of those that are more
than 90 days in arrears. "The foreclosure inventory that is
building up is going to take an incredibly long time for lenders
to clear," said Leah Hendey, research associate at the Washington
firm. "At the current pace of foreclosure sales, we are looking
at a process that could take decades to complete. It is critical
that the status of these properties be resolved quickly if we
want to stabilize communities and housing markets." This decline
was driven by a drop in delinquent loans, which fell to 3.7% in
June from 5.5% in December 2009.

In hard-hit areas like Riverside and Stockton, Calif., the
foreclosure rate declined significantly, dropping 1.9 percentage
points and 1.7 percentage points from the peak two years ago.
Florida, New York and Illinois experienced a different shift in
the market with foreclosure rates climbing in cities throughout
those states. In Tampa, the foreclosure rate jumped 2.8
percentage points, and in Chicago, it grew 2.3 percentage points.
Those three states are judicial foreclosure states, which force a
court to make a final decision before a property can leave the
process. This leads to a growing backlog, the Urban Institute
said. Mortgage originations are down in all of the 100 metro
areas surveyed, as well. Some of the largest drops occurred in
Buffalo, N.Y., where originations fell 39% this year, and Miami,
where new home loans fell 82%, the report said.

RealtyTrac: 2012 - the year of the streamlined short sale

RealtyTrac is calling 2011 the year of foreclosure litigation,
strategic default, failing foreclosure law firms and shadow
inventory. It also was a year of infighting between regulators,
underwater mortgages and the year when Mortgage Electronic
Registration Systems faced suits over everything from its
business model to its assignment procedures. Joel Cone, staff
writer for RealtyTrac's Foreclosure News Report, released a
lengthy report on what this year brought for the mortgage, real
estate and default servicing industries. So what did we learn in
2011? Cone says more borrowers learned to lean on strategic
default, choosing to walk away from distressed or underwater
loans instead of continuing to make payments on their mortgages.
Other borrowers discovered the system is moving at a snail's
pace, giving them more room to float by without making payments
on mortgages. As banks struggled to catch up from 2010's
robo-signing-induced foreclosure moratorium, Cone says borrowers
learned to gain a strategic advantage from the delays. Cone
writes that "armed with knowledge that the financial institutions
are so far behind the eight ball playing catch-up with the
delayed foreclosures, homeowners have no motivation to move on."
He added, "There are documented cases now of homeowners who are
simply staying in their homes without making a mortgage payment
for as long as three years, figuring they can stay until the bank
gets around to foreclosing on them. In the meantime, they are
living rent-free."

RealtyTrac data shows it took on average 336 days to complete a
foreclosure on properties that made it through the process in the
third quarter of 2011, that's up 180% from the first quarter of
2007 when it took an average 120 days, Cone said. The states
with the longest foreclosure timelines include New York, where it
takes an average of 986 days to foreclose; New Jersey, where it
takes about 974 days; and Florida, where it can take up to 749
days to complete a foreclosure. As homeowners and foreclosure
firms continue to sort through the mess, Cone noted several major
foreclosure law firms shut down and others to pick up new
business. Casualties included heavy hitters David J. Stern in
Plantation, Fla., the Amherst, New York-based law firm Steven J.
Baum PC (which paid $2 million to settle allegations from a
Department of Justice probe into its allegedly misleading
foreclosure documents), and Fort-Lauderdale, Fla.- based Ben-Ezra
& Katz, which shuttered its foreclosure practice.

While some firms stumbled, others saw an opportunity to grab
market share. Cone quotes data, which shows Atlanta-based
McCalla Raymer opening new branches and adding foreclosure
divisions in the Southeast to handle up to 5,000 transfer files
from foreclosure giants that have shuttered their doors. So
what's Cone's take on 2012? He believes short sales will play a
huge role. "The dysfunctional and delayed foreclosure process
may finally be leading lenders to usher in the much-anticipated
'year of the streamlined short sale' in 2012," he wrote.

Stock losses hit public pensions

Total investments held by pension systems administered by state
and local governments fell 8.5% from the second quarter, although
investments did inch up 1.1% from the same period a year earlier.
The total holdings reached $2.5 trillion in what was the eighth
consecutive quarter of year-on-year growth. After being battered
by the financial crisis and recession, public pensions had seen
four straight quarterly increases starting in 2010. But in the
third quarter, pensions' corporate stock holdings fell 14.9% from
the second quarter to $134.7 billion. That marked a 6.6% drop
from the third quarter of 2010. And international securities
declined for the first time since the second quarter of 2010,
falling 14.2% from the second quarter to $448.9 billion. It was
the largest decline in international securities since the fourth
quarter of 2008, in the midst of the Great Recession, according
to the Census.

Public retirement systems depend on contributions from employees
and employers to pay benefits, but the lion's share of their
revenue comes from investment returns. A year ago, concerns
about public pensions' soundness reached a fever pitch.
Conservative members of the US Congress called for the systems to
lower their expected rates of return — a metric that is used to
determine the systems' abilities to meet their obligations —
and for states to have the unprecedented option of filing for
bankruptcy to escape public employee contracts. The bankruptcy
idea has largely disappeared, although earlier this month a
leading Republican US senator, Jim DeMint of South Carolina,
hinted other legislation changing public pensions could be coming

Equator sees 1.17 million short sales

Default servicing technology company Equator says nearly 1.2
million short sales were initiated through its module over the
past two years. The company tracks this data through its default
servicing platform, which helps mortgage industry clients deal
with loan modifications, short sales, deeds-in-lieu, foreclosure
processing and REOs. Los Angeles-based Equator said Wednesday
that more than $150 billion in assets have been sold using its
technology platform over the past eight years. Analyzing trends
from the recent fourth quarter, Equator said servicers heading
into 2012 are focused on compliance issues. "The needs of our
clients have focused on the demands for stricter compliance and
infrastructure security,” said Chief Operating Officer John
Vella. As the firm transitions into 2012, it's prepping the
launch of the REvolution software program, which will provide
real estate professionals with a system to track both distressed
and traditional properties. The company said the software gives
agents enough flexibility to automate their daily work-flow
cycles from a single portal, removing the need for agents to
employ more than one software system to handle various asset
types and sales functions.

Jobless claims up

Initial jobless claims rose last week after a few weeks of
declines and remain at levels last since in 2008. The Labor
Department said the seasonally adjusted figure of actual initial
claims for the week ended Dec. 25 increased to 381,000 from
366,000 the previous week, which was revised upward 2,000.
Analysts surveyed by Econoday expected 372,000 new jobless claims
last week with a range of estimates between 370,000 and 383,000.
Most economists believe weekly claims lower than 400,000 indicate
the economy is expanding and jobs growth is strengthening.
Initial claims have been lower than this threshold for most of
the past two months. The four-week moving average, which is
considered a less volatile indicator than weekly claims, declined
by 5,750 claims to 375,000 — the lowest in more than three
years — from the prior week's slightly revised 380,270. The
seasonally adjusted insured unemployment rate for the week ended
Dec. 17 inched higher to 2.9% from 2.8% the previous week,
according to the Labor Department. The total number of people
receiving some sort of federal unemployment benefits for the week
ended Dec. 10 rose to 7.23 million from 7.15 million the prior

WSJ - cracked foundation threatens housing recovery

A house is only as good as its foundation. The same is true of
the housing market. Unfortunately, its foundation, the
housing-finance system, still has big cracks in it. Until those
are fixed, any hoped-for recovery may prove difficult to sustain.
That isn't to say housing won't show signs of improvement.
Recent data, such as new-home starts and existing-home sales,
have offered some glimmers of hope. Tuesday's release of the
S&P/Case-Shiller index for October is likely to show further
slippage of prices. But the rate of decline in the index, which
tracks home prices in 20 metropolitan areas, is expected to
continue slowing, to less than 3% year over year. That trend,
some economists expect, presages prices finding a floor in 2012.
Meanwhile, mortgage rates hit a new low last week; Freddie Mac
said the average for a 30-year fixed-rate loan was 3.91%. Such
super-low rates and the resulting increased affordability of
homes may spur more housing activity.

Still, the challenge of housing-finance overhaul remains a
long-term headwind. As things now stand, housing finance remains
almost completely dependent on government support via proxies
like Fannie Mae and Freddie Mac. That isn't likely to change
soon. Both Congress and the administration essentially punted in
2011 on hard decisions about the future of those firms and are
likely to do so again in the coming presidential-election year.
Washington's inaction is somewhat understandable, if
disappointing. Any overhaul will force the government to decide
if it wants a housing market where risk is taken by home buyers
and private investors, or by the taxpayer. Any action also may
threaten the existence of 30-year, fixed-rate mortgages with a
prepay option and require a rethink of subsidies such as the
deductibility for tax purposes of mortgage interest.

But the dithering isn't only over big issues. Many small
decisions about changes to housing-finance rules haven't been
finalized. Regulators, for example, have yet to give banks
concrete guidance about how they will have to handle mortgages if
they want to sell them to private investors. Speaking at a
conference earlier this month, J.P. Morgan Chase Chief Executive
James Dimon lamented such a lack of progress saying it is
"holding back the mortgage market." Continued delay means that
any gains in housing may be built on shaky ground.

Expanding government role in mortgages

Washington lawmakers, who began 2011 with sweeping plans to
shrink the US government's role in mortgage finance, are heading
into 2012 after enacting policies that expand it. An 11th-hour
payroll tax cut extension signed into law last week would for the
first time divert funds directly from Fannie Mae and Freddie Mac,
the two mortgage-finance companies under US conservatorship, to
pay for general government expenses. That move came after two
others that also are expected to increase government involvement:
Lawmakers allowed a tax break on private mortgage insurance to
expire and raised loan limits for mortgages insured by the
Federal Housing Administration. Advocates of private mortgage
finance say they are concerned that using fees from Fannie Mae
and Freddie Mac is setting a precedent that will keep the
government in the mortgage business for a decade or more. Fannie
Mae, Freddie Mac and the FHA currently back more than 90% of loan
originations, about double what they did during the subprime
lending boom, according to Inside Mortgage Finance, a trade

Earlier in the year, both the Obama administration and members of
Congress outlined plans to reverse that trend. In February, US
Treasury Secretary Timothy F. Geithner released three options for
reducing government's role in housing finance. Shortly afterward,
Republicans introduced bills to wind down Fannie Mae and Freddie
Mac, which have cost taxpayers about $153 billion since 2008
because of defaults on loans they guaranteed. The legislation
never moved forward because there was no agreement even within
the Republican caucus on the best way to proceed. In December,
pushing to find about $36 billion in revenue to offset the
payroll tax cut for two months, Congress instituted a decade-long
increase in the premiums that Fannie Mae and Freddie Mac charge
lenders, known as "g fees," to guarantee principal and interest
on home loans. Lenders typically pass on the cost of the fees to
borrowers as higher interest rates. The move is drawing
criticism: It relies on long-term revenues from entities both
Democrats and Republicans want to shrink, and the money won't be
spent to offset the risk of loan defaults. "In effect, this is a
tax on Fannie and Freddie mortgages," said Bert Ely, a banking
consultant in Alexandria, Virginia. "When you go to privatize or
take any action to wind them down, you have a budget effect that
you didn't have before."

Fewer delinquencies, more foreclosures coming

Real estate research and marketing firm Trulia said employment
figures improved slightly at the end of 2011, making it possible
for more borrowers to pay their mortgages next year. While
Trulia says this trend could reduce 2012 delinquencies, the
company expects foreclosures to continue to climb as banks sort
through a backlog of distressed properties and foreclosures that
stalled in the wake of robo-signing and increased regulatory
oversight. The firm says once a settlement between mortgage
servicers and state attorneys general is finalized, many delayed
defaults will plunge through the process. As for what this means
for real estate agents, Trulia said an increase in "foreclosures
will depress prices for several reasons — foreclosed homes are
often sold at a discount and used as comps for non-distressed
homes." In turn, this will kill seller motivation even though
buyers stand to benefit from affordable pricing structures.
"Agents should be gearing up with competitive pricing strategies
to catch buyers and preparing to counsel their traditional
seller-clients about the depressed prices to come in
high-foreclosure areas," Trulia said. For those Americans now
confined to the rental market, costs will be rising in 2012 as
people losing their homes move toward the rental model. To
resolve the issue, high-cost cities need to address the rental
shortage directly by having local governments get rid of
restrictions and permitting processes that are too stringent,
according to Trulia.

WSJ - tracking down alleged victims

The Justice Department faces the daunting task of tracking down
more than 210,000 alleged victims and determining how to
compensate them, following last week's $335 million fair-lending
settlement with Bank of America Corp.'s Countrywide unit.
Minority borrowers who suffered the greatest harm from
Countrywide's allegedly discriminatory mortgage-lending practices
could be the most difficult to locate, observers say, because
they are the victims most likely to have lost their homes to
foreclosure and subsequently moved several times. The landmark
case is also the first by the Justice Department that accuses a
lender of steering borrowers to more costly mortgages, creating
novel and possibly difficult questions on setting monetary
payments for some victims. For example, how should the government
compensate a family that both lost its home and was unfairly
steered into a more costly subprime loan?

The agreement, announced last Wednesday, was the largest
residential fair-lending settlement in history. It resolved
allegations that Countrywide and its subsidiaries engaged in a
widespread pattern of discrimination against black and Hispanic
borrowers from 2004 to 2008. Home borrowers allegedly were
charged higher fees and costs. Others allegedly were steered into
costly subprime loans, even though they could have qualified for
a prime mortgage, the type of loan offered to borrowers with the
best credit histories. Bank of America said it reached the
settlement "to resolve issues about Countrywide's alleged
historic practices" before it acquired the company in 2008. The
bank also said it discontinued Countrywide products and practices
that "were not in keeping" with its commitment to fair and equal
treatment of customers.

As the Justice Department's settlement administrator begins to
track down victims, the recent experience of the Federal Trade
Commission, which inked its own settlement with Countrywide last
year, offers a possible road map. Bank of America paid the FTC
$108 million to settle charges that Countrywide took advantage of
more than 450,000 distressed homeowners by inflating the cost of
services relating to their defaults. The FTC began mailing
refund checks this summer, but 18 months after the agreement, the
agency still holds about 25% of the money because it can't find
some people. Officials there are also concerned that at least
some victims haven't cashed the checks out of worries the refunds
are part of a scam. The agency is preparing to conduct another
round of searches for remaining victims. The Justice Department
is confident its settlement administrator "will be successful in
locating the vast majority of the victims and is committed to
ensuring that best efforts are made to do so," spokeswoman
Xochitl Hinojosa said.

SEARS to close 120 stores

Sears Holdings said today that between 100 and 120 Sears and
Kmart stores will be closed after terrible holiday sales during
what is the most crucial time of the year for retailers. Sears
has yet to determine which stores will be closed, but there has
been a clear shift in where the retailer will devote its
resources. The company is moving away from its practice of
propping up "marginally performing" stores in hopes of improving
their performance. Sears said it will now concentrate on
cash-generating stores. "Given our performance and the difficult
economic environment, especially for big-ticket items, we intend
to implement a series of actions to reduce ongoing expenses,
adjust our asset base, and accelerate the transformation of our
business model," said CEO Louis D'Ambrosio. "These actions will
better enable us to focus our investments on serving our
customers." Sears would not discuss how many, if any, jobs would
be cut. Sears Holdings has more than 4,000 stores in the US and

Housing sector lifted by rent demand

The percentage of Americans who own their home dropped from a
peak of 69.2% in late 2004 to a 13-year low of 65.9% in the
second quarter. It edged up to 66.3% in the third quarter of
this year. On the flip side, the percentage of rental properties
that are empty fell to 9.8% in the third quarter from 10.3% a
year earlier. In a recent report, Oliver Chang, an analyst at
Morgan Stanley, dubbed 2012 "The Year of the Landlord." "Rents
are rising, vacancies are falling, household formations are
growing and rental supply is limited," the Morgan Stanley report
stated. "We believe the demand for rental properties will
continue to grow." Groundbreaking for new housing jumped 9.3% in
November to the highest level in 19 months, fueling optimism that
the battered housing market was regaining its footing. The
gains, however, were almost solely in multifamily housing.
Groundbreaking for structures with five or more units shot up
more than 30% from October to now stand at nearly double the
year-ago level. Prices reflect the shift in demand. Rental costs
are up 2.4% over the last year, compared with an increase of just
0.6% in 2010. Steve Blitz, senior economist at ITG Investment
Research, says the lure of higher returns is spurring the
development of apartment buildings. He argued the next "boom" in
residential construction has already started. "The reason rents
were rising is that through the past 15 years there has been an
under-building of rental properties because typical renters were
increasingly able to garner cheap financing to buy a house," he
wrote in a research note.

Double dip for big pharma

Pharmaceutical giants’ profits could take a "double-dip" hit
next year from patent expirations on blockbuster drugs and
President Barack Obama’s healthcare reforms, according to a
report from CreditSights, a credit market research firm. Patent
expiries are set to cost pharmaceutical firms $54 billion in
sales between 2011 and 2012, with the cost reaching over $255
billion by 2016, according to EvaluatePharma, a research firm.
“We could see a double-dip effect in 2012, due to lower sales
and earnings from loss of exclusivity, and healthcare reform
costs that have not yet been reduced,” said Diya Sawhny senior
pharmaceuticals analyst at CreditSights. “A significant slate
of prescription products lose patent protection in 2011 and 2012,
and their sales will decline,” she added.

Obama’s healthcare reforms include increases to the sales taxes
pharmaceutical firms pay for their drugs used in government
health programs. Those taxes are based on prior year sales, so
firms with blockbusters going off-patent in 2012 may face both
higher taxes and a drop-off in sales. Obama’s Affordable Care
Act was enacted in March 2010 with the intention of improving
healthcare for the uninsured. Changes include expanding the
number of people who are eligible for Medicaid, the state-run
insurance program aimed at low-income individuals, with 16
million extra enrollees expected by 2019. A pre-existing tax on
prescription drugs sold to Medicaid recipients was increased from
15.1% to 23.1%, and was expanded to include drugs given in care
organizations. Between 2011 and 2018, pharmaceutical firms must
pay an additional federal tax based on their market share of
sales to government health programs. The cost of the tax to the
pharmaceutical sector is fixed by law, and rises from $2.5
billion in 2011 to $3 billion from 2012 until 2016.

Home prices fall in most major cities

Home prices in October declined in 19 American cities, as the
Standard & Poor's/Case Shiller home price index showed drops in
both the 10-city and 20-city composites. According to the latest
S&P report, home prices declined 1.1% and 1.2% for the 10- and
20-city composite indexes. "There was weakness in the monthly
statistics, as 19 of the cities posted price declines in October
over September," said David Blitzer, chairman of the Index
Committee at S&P Indices. "Eleven of the cities and both
composites fell by 1.0% or more during the month. And even though
some of the annual rates are improving, 18 cities and both
composites are still negative. Nationally, home prices are still
below where they were a year ago. The 10-city composite is down
3.0% and the 20-City is down 3.4% compared to October 2010." S&P
said fourteen of 20 metropolitan statistical areas and both the
10 and 20-city composite indexes had improved annual returns up
from September.

Miami experienced no change in annual returns in terms of pricing
during the month of October, while Atlanta, Detroit, Las Vegas,
Los Angeles and Minneapolis saw their annual rates worsen.
Atlanta experienced the lowest annual pricing return, with prices
down 11.7%. "Atlanta and the Midwest are regions that really
stand out in terms of recent relative weakness. Atlanta was down
5% over the month, after having fallen by 5.9% in September," the
report said. "It also has the weakest annual return, down 11.7%.
Chicago, Cleveland Detroit and Minneapolis all posted monthly
declines of 1.0% or more in October. These markets were some of
the strongest during the spring/summer buying season. However,
Detroit is the healthiest when viewed on an annual basis. It is
up 2.5% versus October 2010." The only metropolitan statistical
area to record a positive monthly change was Phoenix, which saw
home prices edge up 0.3% from September to October.

Short sales increase in Florida and California

Short sales made up 73% of the pending sales last month in the
core Orlando market, up from 64% a year ago, according to a
report released Wednesday by the Orlando Regional Realtor
Association. Sales of these "underwater" houses constituted
about a third of the 1,950 November closings reported by Realtors
in the core market, which consists mainly of Orange and Seminole
counties. Sales of "ordinary" existing homes constituted about
40% of the market, while bank-owned properties made up about a
quarter of the month's sales. Short-sale prices have also risen
during the past year, from $99,000 in November 2010 to $106,000
last month. But the median price of "normal" resales has declined
8% during the same 12 months.

Over the past year, short sales and foreclosures, key indicators
of the health of the housing market, have dramatically increased
in California too. Originally, foreclosures and short sales were
occurring in the Inland Empire, Lancaster and northern Los
Angeles County, but now they’re creeping south. From Jan. 1 to
Dec. 1, 2010, 59 short sales were recorded in Sherman Oaks. This
year during the same period, 92 homes sold in short sales with
another 36 pending sales and 22 actively listed, for a total of
150 properties, a 154% increase. Meanwhile, foreclosures sold
during the same months last year totaled 48, compared to 51
foreclosure sales closed, four pending and another nine on the
market, for a total of 64 homes, a 33% increase. About a third
of the short sales and the majority of foreclosures occurred in
pricey neighborhoods north of Ventura Boulevard. Although home
prices in the southern San Fernando Valley, including Sherman
Oaks, slid down about 26% to 35% during the economic downturn,
they were still less than the 40% to 60% price declines recorded
in other locales.

Jobless claims down

Government reports on weekly jobless claims and manufacturing
activity in the Northeast for December released Thursday offered
fresh evidence the US economic recovery is picking up steam. New
US claims for unemployment benefits dropped to a 3 1/2 year low
last week, a government report showed on Thursday, suggesting the
labor market recovery was gaining speed. Initial claims for
state unemployment benefits dropped 19,000 to a seasonally
adjusted 366,000, the Labor Department said. That was the lowest
level since May 2008. The prior week's claims data was revised
up to 385,000 from the previously reported 381,000. Economists
polled by Reuters had forecast claims rising to 390,000 last
week. The unexpected drop in claims last week pushed them closer
to the 350,000 mark that analysts say signals labor market
strength. The four-week moving average of claims, considered a
better measure of labor market trends, fell 6,500 to 387,750 —
the lowest since mid-July 2008. The number of people still
receiving benefits under regular state programs after an initial
week of aid edged up 4,000 to 3.6 million in the week ended Dec.
3. Economists had forecast so-called continuing claims rising to
3.63 million from a previously reported 3.58 million. The number
of Americans on emergency unemployment benefits increased 254,642
to 3.05 million in the week ended Nov. 26, the latest week for
which data is available. A total of 7.45 million people were
claiming unemployment benefits during that period under all
programs, up 874,670 from the prior week.

WSJ - foreclosures slow, build for next year

Declines in foreclosure filings slowed in November from a year
earlier, suggesting a new wave of foreclosures could hit the
market early next year, according to a new report by RealtyTrac.
The online marketplace for foreclosure properties said
foreclosure filings in November dropped 14% from last year and 3%
from October. Yet the year-over-year decrease represented the
smallest annual decline over the past 12 months, and some states
actually posted year-over-year increases in foreclosure activity.
Also, despite the seasonal slowdown in foreclosure filings,
RealtyTrac said its research suggests that a new wave of
foreclosures could come next year. RealtyTrac measured
foreclosure filings though default notices, foreclosure auctions
and bank repossessions. It said default notices were down 9% from
last year, while bank repossessions and foreclosure auctions both
dropped 17%.

California had some of the worst foreclosure statistics, as nine
out of the top 10 highest foreclosure rates in metropolitan areas
were in the Golden State. California, along with Florida and
Michigan, had the highest total foreclosure filings in November,
with California making up 28% of the national total, the most of
any state. Nevada, California and Arizona had the highest
foreclosure rates, with Nevada topping the chart. One in every
175 Nevada housing units were involved in a foreclosure filing in
November, more than three times the national average. On the
opposite side, North Dakota, Vermont and West Virginia had the
lowest foreclosure rates. According to a recent study from
TransUnion, the highest mortgage delinquency states or districts
in 2012 are expected to be Florida, Nevada and the District of
Columbia, while North Dakota, South Dakota and Wisconsin should
have the lowest rates.

New York factory orders up

A gauge of manufacturing in New York State showed growth
accelerated in December to its highest level since May as new
orders improved, the New York Federal Reserve said in a report
today. The New York Fed's "Empire State" general business
conditions index rose to 9.53 from 0.61 the previous month.
Economists polled by Reuters had expected a reading of 3.00. New
orders rose to 5.10 from minus 2.07, while inventories gained to
minus 3.49 from minus 12.20. New orders were also at their
highest level since May. The survey of manufacturing plants in
the state is one of the earliest monthly guideposts to US factory
conditions. The gain in December added on to improvement last
month that pulled the index out of a five-month contraction.
Employment gauges continued to be mixed. The index for the number
of employees perked up at 2.33 from minus 3.66, but the average
employee workweek index fell to minus 2.33 from 2.44.

The Federal Reserve has long maintained that inflation will
settle at levels at or below those consistent with its price
stability mandate. Last month, wholesale prices were pushed up
by a 1% rise in food prices. Vegetables accounted for more than
half of the increase in food prices last month. Food prices rose
0 .1% in October. Gasoline prices edged down 0.1% after falling
2.4% in October. In the 12 months to November, producer prices
increased 5.7% after rising 5.9% the prior month. Wholesale
prices outside of food and fuel were bumped up by passenger car
prices, which are on the rise again after floods in Thailand
disrupted supply chains. Motor vehicle production was earlier
this year disrupted by the earthquake and tsunami in Japan.
Passenger car prices rose 0.6% after falling 0.8% in October.
Prices for light motor trucks fell 0.2% after dropping 1.6% in

Olick - the politics of housing

"Housing may have been the catalyst for the Great Recession, but
it is not number one on America’s fix-it list for our next
President. Fixing the economy should come before housing policy,
according to a new survey by real estate website
Americans first want to see lower unemployment, more employment
growth and reducing the federal budget deficit. 'The partisan
split in Washington and the recent housing policy debates are not
what Americans want from their government,' said Trulia’s chief
economist Jed Kolko. 'Although Washington and lobbyists have been
debating the conforming loan limit, Americans would rather see
more action to make refinancing easier and to deal with vacant
homes.' Still, those same respondents, 72% of them, said
government policies should encourage home ownership. Wasn’t
that 'encouragement' kind of what got us into this mess? The
Trulia survey seeks to draw distinctions between what Republicans
want from housing policy and what Democrats want, but the answers
don’t differ all that much, except when it comes to helping
troubled borrowers. 74% of Democrats want government to encourage
mortgage loan modifications that reduce principal balances. Just
61% of Republicans support that.

For respondents from both political parties, the number one sign
of housing recovery would be fewer defaults and foreclosures; at
the bottom of the list is rising homeownership. This is perhaps
the most troubling finding for the near future of the housing
market, because we are going to see more foreclosures in the
first half of 2012, as banks work through the enormous backlog of
delinquent loans that were on hold this year due to the so-called
'robo-signing' foreclosure paperwork mess. Since consumer
confidence is going to be the driving factor in housing’s
recovery, increased foreclosures and the headlines that go with
them, regardless of where they are locally, will have an overall
impact on home buying nationally. Sales have been stabilizing
slightly this Fall, but likely only because foreclosures had been
stalled, so the distressed share of the market was not so
blatant; that’s about to change. Most analysts are predicting
that the big pain will be in the first half of 2012, and as those
foreclosures are supposedly quickly absorbed into the market,
organic home buyers and sellers will come back. However, more
than half of those surveyed by Trulia said they were not at all
confident that the President can stabilize the housing market in
the next year. This is a notable increase since he took office."

Sales outlook brighter

The National Retail Federation said it now expects holiday sales
to rise 3.8% to a record $469.1 billion. That is up from the
group's October forecast, which called for growth of 2.8%. The
new forecast is still lower than the 5.2% growth seen last year,
but is above the 10-year average increase of 2.6%. The reason
for the updated forecast is that NRF, a retail industry trade
group, found that industry sales for November rose 4.5%
year-over-year, and that the average American has completed far
less of their holiday shopping than in previous years — an
indication that many shoppers bought for themselves in November
and have lots of shopping left to do. While retailers are
"cautiously optimistic" that the season will turn out better than
initially expected, NRF President Matthew Shay said "a number
factors, including the debt crisis in Europe and continued
political wrangling in Washington, could impact consumer spending
this holiday season and into 2012." The NRF's figures compare
sales at retail stores with the year-earlier period and exclude
restaurants, gasoline, automobiles and online sales. That is why
its results look different than those announced by the US
Commerce Department, which said US retail sales grew a weaker
than expected 0.2% in November.

WSJ - Chicago sued by Fannie and Freddie

The federal regulator overseeing Fannie Mae and Freddie Mac sued
the city of Chicago on Monday over an ordinance that makes
mortgage creditors liable for the upkeep of vacant properties.
Lenders are liable for daily fines of as much as $1,000 if they
don't mow lawns and provide basic maintenance on vacant buildings
under an ordinance signed into law by Mayor Rahm Emanuel. Lenders
especially opposed the requirement they maintain properties they
hadn't yet taken back through foreclosure. After lenders
threatened to sue, the city revised the ordinance in November by
dropping a provision that had defined creditors as property
owners. But those changes didn't satisfy the Federal Housing
Finance Agency, which sued Monday.

Chicago has one of the biggest foreclosure backlogs in the US,
delays thanks in part to state requirements that lenders take
back homes through the courts Banks and courts have been
overwhelmed by the volume of cases, that have exacerbated the
problem of neglected vacant buildings. The agency said the
ordinance was unfair because it imposed all of the costs of
ownership without any of the benefits, such as the right to sell
or lease the property. The lawsuit also said the ordinance
overstepped federal law by subjecting Fannie and Freddie to
regulation that is the jurisdiction of the FHFA. The ordinance
requires mortgage owners to pay a $500 fee to register vacant
properties and to conduct monthly inspections of properties to
determine if they are vacant. In a statement, the FHFA said that
registration fee "represents a tax" on Fannie and Freddie. "We
are looking into the details of the lawsuit, but this type of
action demonstrates the need for swift action" by the state "to
hold lenders responsible for securing vacant properties," said a
spokesman for Mr. Emanuel. "During the passage of the compromise
ordinance, we negotiated with national and local lenders, who
then stood alongside the mayor to announce the agreement to
secure vacant properties in Chicago."

The lawsuit could help head off copycat ordinances. Las Vegas
last week passed a similar measure that would require banks to
pay a $200 registration fee for properties with defaulted
mortgages. Bank officials could face fines or jail time for homes
in disrepair. Consumer advocates and community groups have
criticized banks for delaying foreclosures or, in extreme cases,
abandoning them in order to avoid picking up the tab for shabby
homes once owners or tenants vacate them. Researchers at the
nonprofit Woodstock Institute estimated that nearly 1,900 vacant
properties in Chicago are stuck in the foreclosure process at a
cost of $36 million in upkeep costs borne by the city. "By in
many cases ignoring these properties you're doing a disservice to
the community and a disservice to the investor," said Tom
Feltner, vice president of the Woodstock Institute. Fannie and
Freddie were taken over by the government three years ago, and
today they answer to their regulator, the FHFA, which is charged
with conserving the firms' assets. The rescues of both companies
have cost taxpayers $151 billion and counting. Monday's lawsuit
was filed in US District Court for the Northern District of

See you at the top!
Chris McLaughlin


Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit

* Owner of one of Florida's largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris' 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

NAR- housing and jobs are voters' main concerns

A recent survey by, the consumer website from the
National Association of Realtors (NAR), finds that jobs and the
housing market will be two of the most important issues for
voters in the 2012 election. Nearly one-third of respondents said
housing will be the top issue on their mind when they head to the
polls next November. Respondents were asked “What issue area
will have the greatest impact on your vote in 2012?” National
security, healthcare, and energy/environment trailed housing and
unemployment by wide margins. With unemployment still high, it
is easy to see why so many Americans are concerned about the job
market. However, employment and the housing market are
inextricably linked because economic growth and job creation
cannot occur without a housing recovery.

Housing accounts for more than 15% of the US. Gross Domestic
Product – it’s a key driver of the national economy. Home
sales generate jobs. NAR estimates that for every two homes sold,
one job is created. New spending on homebuilding products,
furniture, and other residential investments also have a
significant economic impact. Some recent indicators show that
the economy might be starting to rebound, with pending home sales
rising strongly in October, according to NAR’s Pending Home
Sales Index. However, any changes to current programs or
incentives must not jeopardize a housing and economic recovery.
Unemployment, consumer confidence and consumer spending will not
rebound until a number of issues are addressed.

Shopping strong into December

For the week ending Dec. 9, consumers spent $5.9 billion online,
up 15% from the same period a year earlier, according to
comScore, which tracks Internet activity. E-commerce spending
for the first 39 days of the 2011 holiday season reached $24.6
billion, also up 15% versus the corresponding days last year,
comScore added. Earlier in the season, the day that has become
known as "Cyber Monday" saw a record $1.25 billion spent online
in the United States, up 22% from last year. Other early season
shopping days were also strong, with "Black Friday" e-commerce
sales jumping 26% from a year ago. That sparked concern that
sales could weaken later in the season, but so far that has not
happened, comScore Chairman Gian Fulgoni said on Sunday. "These
highlights represent another very positive sign for the holiday
shopping season, as the week following 'Cyber Week' often
experiences relative softness in spending momentum due to
retailers pulling back on their promotional activity," he said.

BOA develops rental program

Bank of America is looking at a new program to rent a home back
to the borrower after foreclosure. "There are programs that we
are quite interested in," said Ron Sturzenegger, who leads the
bank's legacy asset servicing division. "We are talking with
investors that would come in and buy these houses and would lease
them back to who would now be the now tenant." In February, BOA
formed the division to handle the servicing for delinquent
mortgages, loans no longer being written, and to sort out
outstanding representation and warranty claims. Currently, more
than 35,000 employees at the bank are sorting through 1.1 million
loans 60 days delinquent or worse, according to its third-quarter
financial statement. The Federal Housing Finance Agency (FHFA)
is working on an REO rental program for Fannie Mae and Freddie
Mac. It received more than 4,000 ideas on how to do it. But
private banks own $50.4 billion worth of REO properties, too,
according to the Federal Deposit Insurance Corp., and millions of
these homes are sitting vacant. Sturzenegger described how their
idea would work.

"We are looking at programs where you can capture somebody before
the REO process and offer a deed-for-lease. We would go to the
customer and say, 'We'll do a short sale. Will you be interested
in leasing your property back? We're still going to sell the
property. You will no longer be the owner. But you can be a
tenant now in that same property and save you from moving on,'"
he said. Sturzenegger stressed the bank would still sell the REO
as before in areas where there is a market for them and they can
still get reasonable bids. But some areas are so saturated with
inventory, there isn't enough investor or homebuyer demand and
properties can sit for years uninhabited. Rick Sharga, the
executive vice president at Carrington Mortgage Holdings, said in
an interview that many firms, including Carrington are preparing
to participate. "We already have the infrastructure and assets
in place to participate effectively," he said. "Everyone is
waiting on final direction from the FHFA." Sturzenegger stressed
the private program at BOA is in its infancy. "It's in the very
early stages," he said.

US stocks down

US. stocks fell Monday after Moody's Investors Service said last
week's European fiscal pact will not deter it from reconsidering
the credit ratings of all European Union nations. The Dow Jones
industrial average fell 170 points in the first hour of trading.
The euro weakened against the dollar and the yields on Italian
and Spanish government bonds rose as investors became more
nervous about holding the debt of those countries. European stock
indexes fell broadly. Moody's said that last week's summit of
European leaders produced "few new measures" and that Europe's
financial crisis remains in a "critical and volatile stage." The
17 nations that use the shared currency and the region in general
remains "prone to further shocks and the cohesion of the euro
under continued threat," Moody's said. As a result, the agency
said it would still review the creditworthiness of European
countries in the first three months of 2012. The warning from
the credit rating agency deflated optimism about last week's
pact, which called for tougher fiscal discipline in countries the
euro and greater oversight of national budgets by a central

Hot markets to cool

Top real estate markets in the United States are beginning to
cool down, according to Clear Capital, a provider of housing data
and valuation services. The markets are still growing and
improving, its latest report finds, but not at the rates seen in
recent memory. "Even though as a whole, this group hasn’t
experienced returns this low since June 2011, each of the 15
markets continued to post quarterly gains," the Clear Capital
report states. "The overall performance of the group has
stabilized and tightened, with only 3.1% separating the highest
performing market, Washington, D.C., from the 15th place market,
Cleveland." Four Florida markets — Orlando, Tampa,
Jacksonville and Miami — continue to keep their positions among
the highest performing markets quarter-over-quarter, rebounding
from the steep drops and high levels of foreclosures they
experienced over the past two years, the report states.
According to Clear Capital, Orlando and Miami also show strong
year-over-year performance, topping the list with 5.9% and 5.4%
growth respectively. "The strong upward price movement for these
Florida markets has correlated with a 12% drop in REO saturation
over the last year at the state level," the report says. "The
growth in Florida’s MSAs must be described in proper
perspective against the state’s precipitous -59.1% drop in
prices from peak values in 2006 to today." Atlanta is now the
market feeling the most acute drop in housing. The city is down
nearly 20% year-over-year and the REO saturation rate is reaching

43%, second only to Las Vegas and Detroit.

Home prices fall

According to the CoreLogic Home Price Index (HPI), national home
prices, including distressed sales, also declined by 3.9% on a
year-over-year basis in October 2011 compared to October 2010.
This follows a decline of 3.8% in September 2011 compared to
September 2010.  Excluding distressed sales, year-over-year
prices declined by 0.5% in October 2011 compared to October 2010
and by 2.1% in September 2011 compared to September 2010.
Distressed sales include short sales and real estate owned (REO)

Highlights as of October 2011

-  Including distressed sales, the five states with the highest
appreciation were:  West Virginia (+4.8%), South Dakota (+3.1%),
New York (+3.0%), District of Columbia (+2.4%) and Alaska

-  Including distressed sales, the five states with the greatest
depreciation were: Nevada (-12.1%), Illinois (-9.4%), Arizona
(-8.1%), Minnesota (-7.9%) and Georgia (-7.3%).

-  Excluding distressed sales, the five states with the highest
appreciation were: South Carolina (+4.6%), Maine (+3.1%), New
York (+3.1%), Alaska (+2.9%) and Kansas (+2.8%).

-  Excluding distressed sales, the five states with the greatest
depreciation were: Nevada (-8.8%), Arizona (-7.0%), Minnesota
(-5.7%), Delaware (-3.9%) and Georgia (-3.6%).

-  Including distressed transactions, the peak-to-current change
in the national HPI (from April 2006 to October 2011) was -32.0%.
 Excluding distressed transactions, the peak-to-current change in
the HPI for the same period was -22.4%.

-  Of the top 100 Core Based Statistical Areas (CBSAs) measured
by population, 78 are showing year-over-year declines in October,
two fewer than in September.

Citigroup plans layoffs

Citigroup is cutting 4,500 jobs worldwide, Chief Executive Vikram
Pandit said on Tuesday, becoming the latest large bank to trim
staff.  Pandit, speaking at the Goldman Sachs Financial Services
Conference, said the bank would record a $400 million charge in
the quarter for severance and other expenses related to the
layoffs.  The cuts are equal to about 2% of Citi's workforce of
267,000 employees at the end of third quarter 2011.  Pandit said
the cuts would be completed over "the next few quarters" and
would come from a range of businesses.  Citi joins other banks
worldwide that have cut more than 120,000 jobs as regulations
have imposed tighter industry rules and the economy remains weak.
 Pandit said Citi's reductions would involve its proprietary
trading units, which are being wound down.  The 2010 Dodd-Frank
financial reform law features a provision known as the Volcker
Rule that limits banks from betting their own capital in the
market.  Pandit also said Citi's expense previously disclosed
expense reduction program generated $1.4 billion in savings so
far this year, nearly 4% of the bank's $37.72 billion of
operating expenses in the first three quarters.

MBA - mortgage applications increase

Mortgage applications increased 12.8% from one week earlier
(which included the Thanksgiving holiday), according to data from
the Mortgage Bankers Association’s (MBA) Weekly Mortgage
Applications Survey for the week ending December 2, 2011.   The
Market Composite Index increased 12.8% on a seasonally adjusted
basis from one week earlier. On an unadjusted basis, the Index
increased 60.2% compared with the previous week. The Refinance
Index increased 15.3% from the previous week. The seasonally
adjusted Purchase Index increased 8.3% from one week earlier to
its highest level since August 5, 2011. The unadjusted Purchase
Index increased 47.2% compared with the previous week and was
0.8% lower than the same week one year ago.  “Coming out of the
Thanksgiving holiday, applications increased significantly as
mortgage rates dropped to their lowest levels in about two
months,” said Michael Fratantoni, MBA's Vice President of
Research and Economics. “In particular, refinance applications
increased sharply, with some lenders seeing refinance volume
double. Despite this surge, aggregate refinance activity is still
below levels reported two weeks ago. Some lenders indicated they
are beginning to see an increase in HARP loans, but that increase
is still a small portion of the move this week."

The four week moving average for the seasonally adjusted Market
Index is down 3.20%. The four week moving average is up 3.33% for
the seasonally adjusted Purchase Index, while this average is
down 5.13% for the Refinance Index.  The refinance share of
mortgage activity increased to 76.0% of total applications from
73.9% the previous week. The adjustable-rate mortgage (ARM) share
of activity decreased to 5.7% from 5.8% of total applications
from the previous week.  In November 2011, among refinance
borrowers, 52.9% of applications were for fixed-rate 30-year
loans, 26.2% for 15-year fixed loans, and 5.8% for ARMs. The
share of refinance applications for “other” fixed-rate
mortgages with amortization schedules other than 15 and 30-year
terms was 15.1% of all refinance applications. The shares for
30-year fixed and the “other” fixed category increased from
the previous month, while the 15-year fixed and ARM shares
decreased from last month.  For applications for home purchase,
85.5% were for fixed-rate 30-year loans, 6.8% for 15-year fixed
loans, and 5.9% for ARMs. This is the second lowest ARM share for
purchases since January 2011.

Stock market in for a beating?

Robert Prechter, founder and president of Elliott Wave
International, says there's a big storm coming our way.  Prechter
compares the current phase of the market to the late stages of
the 1929 - 1933 period in US history; a time marked by extreme
volatility eventually ending in tears.  "One of the things that
happened in 1929 was that a consortium of the biggest banks in
the country tried to stop the market from going down," notes
Prechter. Those banks failed of course, just as Prechter says
they did when the Central Banks tried to prevent the coming
financial meltdown in 2008 by offering essentially free credit.
The timing is only different, he says, because "banks these days
are much bigger than they were in 1929." In the 20's institutions
were reliant on client money to lead their bailout attempts.
Today Central Banks have the ability to call on future, often
overstated, tax revenues and are unencumbered by anything such as
a gold standard when attempting to ward off the human desire to
hide under the covers, financially speaking.

Prechter also draws parallels to April of 1930, 1937, and other
periods in which relatively brief recoveries dissolved. Pick a
tool, any tool, and Prechter says it suggests a stock market
going lower. "Patterns, sentiment indicators, or momentum are all
saying the same thing: This is a bear market rally."  According
to Prechter, not all the Central Banks in the world trump
international trends towards a cautious, negative mood already
impacting all things financial. This trend, the inverse of those
giddy days of the 1990's when all things seemed possible (even
Internet stocks and the Euro!), causes predictable behaviors in
the masses. They tend to sell stocks, stop spending, and start
revolting against current leadership; all of which should sound
familiar to those who read the newspaper.  It's an environment
confounding to bulls and bears alike. At the beginning of 2011,
Prechter notes, the bulls were betting on a sharp recovery in
stocks and "got hurt quite a bit." Commodities were a bad bet,
hurting "hyper-inflationist" bears.  Let's remember that real
estate isn't in the stock market.

Olick - two housing markets?

"As we head toward the end of the year, for some reason the
drumbeat to claim that housing has bottomed is growing louder.
There were a few positive indicators in September, rising housing
starts and rising home sales, that gave some analysts fodder for
optimism, but the readings on prices are far less rosy, and alas
far more complicated.  Two reports out today show home prices are
falling again after seeing some gains in the Spring and Summer.
Lender Processing Services says they're down 3.7% annually in
September, erasing the gains of the Spring, and they say all of
the 13,500 zip codes it tracks are in the negative.  Meanwhile
CoreLogic says prices fell 3.9% in October, but when you take out
foreclosures and short sales (the latter when the home is sold
for less than the value of the mortgage), home prices are down
just 0.5% annually. The vaunted S&P/Case-Shiller home price index
was down 3.9% in September, and that's a three month running
average including distressed and non-distressed property sales.

So why are analysts now predicting a house price recovery?
Goldman Sachs put out a report late last week predicting that
S&P/Case-Shiller would drop 2.5% further and then bottom,
probably in the summer of 2012. This when the S&P/Case-Shiller
folks themselves predict a 3.5% drop and a bottom later in 2012.
The Goldman theory is based on some kind of 'equilibrium' price
model for each market. They also claim that homes no longer
appear 'expensive.' when you look at price/rent ratios, and that
historical models suggest that income and population, as always,
will drive improved demand.  Then this week analysts at Barclays
Capital honed in on the difference in price drops between
distressed and non-distressed properties. They claim the
non-distressed market is stabilizing, so that must mean that a
foreclosure or short sale is, 'increasingly being seen as a poor
substitute for a non-distressed home,' according to analyst
Stephen Kim. He claims the disparity will in fact widen over

So are we just supposed to ignore the distressed market? What
about the fact that in some cities more than half of the
properties selling are distressed? And what about the fact that
there are more distressed properties coming to market, as the
banks ramp up the long-stalled foreclosure process? And how about
appraisers using distressed properties as comps to non-distressed
properties?  I realize many of you think I'm too bearish on
housing's recovery, but trust me, nobody's more sick of reporting
the same lousy numbers than I am. The problem is that while sales
are improving slightly, and consumer sentiment may be settling a
bit, the mess left to clean up from the past is still weighing
heavily on the future. The economy may be improving slightly,
buyers may be considering getting back in, but we are barely half
way through the overhang of distress, and any change in the
economy could set us back even further.  I am in no way claiming
that housing is in for a quadruple dip nor that we are going to
see more big losses. Frankly I think we're going to be flat in
housing for a long time, which is not a very interesting story to
tell from a reporter's perspective. While there may be two types
of properties (distressed and non-distressed), there is just one
housing market, and you cannot negate one to inflate or deflate
the other."

Small business more optimistic, maybe

Optimism of small business owners remained flat in November at
53%, according to a new scorecard by SurePayroll, the leading
online payroll service for small businesses with less than 100
employees. That's fairly good news after optimism rebounded by
20% in October from an all-time low of 33% in September.  The
report, which measures the current health of small business in
America, also showed hiring was down from October, but wages on
the other hand did tick up slightly. Still both remain down 3%
and 0.5% year-to-date, respectively.  Small businesses make up
99.7% of all employer firms and employ more than half of private
sector workers in this country, according to the US Small
Business Administration, which describes a small business as
having fewer than 500 employees.

While 53% of small business owners are optimistic about the state
of the economy and the health of their business, one must not
forget roughly the same amount of are just as pessimistic. Alter
says most of SurePayroll customers describe themselves as
"cautiously optimistic" and that sentiment rests heavily upon
what happens in Washington.  Next year one of the biggest factors
to impact the decisions made by small businesses is the Supreme
Court's ruling over the constitutionality of Obama's health care
law, according to SurePayroll's November scorecard. By a ratio of
2 to 1, the small business owners surveyed are hopeful the
Supreme Court finds the health care legislation unconstitutional.
If that were to happen, hiring and wages would likely see a
boost, says Alter.  Another big factor to impact small businesses
is whether Congress will act to extend the employee payroll tax
credit and if so, who will have to foot the bill. Passing an
extension would provide many Americans with an extra $1000
dollars in discretionary spending, which would be good for
business, says Alter. But, if it is businesses who have to cover
the expense of that credit, that would certainly hurt hiring and

WSJ - delinquent CMB loans declines

The share of delinquent commercial mortgages that were bundled
together and sold as securities declined modestly during the
third quarter for the first time since the property downturn
began four years ago, according to a survey released yesterday by
the Mortgage Bankers Association.  The share of loans at least 30
days past due fell to 8.92% from 9.02% in the second quarter for
commercial and multifamily loans in mortgage-backed securities.
Those loans have had the worst performance among all commercial
mortgages originated during the boom, and the delinquency rate
was still above the 8.52% mark of one year ago. 

Commercial mortgages held by US banks had a 90-day delinquency
rate of 3.75% at the end of the third quarter, down from 3.94% in
the second quarter. Delinquencies on bank-held commercial loans
have fallen or remained flat in each of the past four quarters.
Delinquencies posted small increases on multifamily mortgages
held by Fannie Mae and Freddie Mac, but the increases came from
very low absolute levels. Freddie Mac has a delinquency rate of
just 0.33%, or around one-tenth of the level of delinquencies of
commercial banks. That was up from 0.31% in the second quarter
but down from 0.36% in the first quarter.  Nearly 0.57% of Fannie
Mae multifamily mortgages were delinquent at the end of
September. That was up from 0.46% at the end of the June, but
down from 0.71% at the end of 2010.

Foreclosures down in Colorado

According to a report re-leased Tuesday by the Colorado Division
of Housing, foreclosure auction sales in Colorado’s
metropolitan counties were up 7.9 percent in November compared to
November of last year. Foreclosure sales in Larimer County rose
47 percent in November compared to a year ago but filings dropped
37 percent. Overall, sales and filings dropped in Larimer County
in the first 11 months of the year compared to the same time
frame in 2010. However, comparing the first 11 months of this
year to the same period last year, foreclosure filings were down
28.6 percent through November while foreclosure auction sales
were down 20.7 percent. New foreclosure filings fell year over
year during November with total filings dropping 21.7 percent
from 2,932 filings in November 2010 to 2,296 filings in November
of this year. Foreclosure auction sales increased during the same
period from 1,195 to 1,290. From October 2011 to November 2011,
foreclosure filings fell 2.3 percent, and foreclosure sales at
auction rose 37.5 percent.

Foreclosure auction sales through November fell year over year
from 2010’s 11n-month total of 18,728 to 14,854 during the same
period this year. Foreclosure filings were also down through
November, falling to 23,556 filings year-to-date this year from
last year’s 11-month total of 32,982. Year-to-date through
November, the counties with the largest decreases in foreclosure
filings, year-over-year, were Mesa County and Denver County,
where filings decreased by 35.2 percent and 32.2 percent,
respectively. Pueblo County reported the smallest decline in
filings with a decrease of 12.5 percent from the first 11 months
of 2010 to the same period this year. All counties surveyed
reported year-over-year decreases in foreclosure filings. For
the first 11 months of this year, all counties also showed
decreases in foreclosure auction sales when compared to the same
period last year.

The counties with the largest decreases in foreclosure auction
sales, year-over-year, were Broomfield County and Adams County,
where auction sales decreased by 40.3 percent and 27.0 percent,
respectively. Pueblo County reported the smallest decline in
auction sales with a decrease of 9.1 percent from the first
eleven months of 2010 to the same period this year. The county
with the highest rate of foreclosure sales during November was
Adams County with a rate of 681 households per foreclosure sale.
Mesa County came in second with 792 households per foreclosure
sale. The lowest rate was found in Boulder County where there
were 3,402 households per foreclosure sale.

Mr. Geithner goes to Germany

U.S. Treasury Secretary Timothy Geithner arrived in Germany on
Tuesday for a three-day blitz of euro zone officials to urge them
to take decisive action to backstop their currency union and
resolve a crushing debt crisis. Geithner will press French
President Nicolas Sarkozy, the new leaders of Spain and Italy and
Germany's finance minister to agree at a crucial European Union
summit on Friday to take steps that will give markets confidence
that no euro zone countries will default, and that the region's
banks will stay solvent. Geithner has made several trips to
Europe in recent months as U.S. concerns over the crisis grow
and, judging by comments from both him and President Barack
Obama, the Treasury Secretary may add to a growing chorus calling
for the European Central Bank to take more decisive action to
resolve the crisis.

The need for action was underscored by Standard & Poor's warning
on Monday that 15 of the 17 euro zone countries now face an
unprecedented mass downgrade if they fail to reach a satisfactory
agreement at the Brussels summit—all the way up to AAA-rated
Germany and France. The Federal Reserve joined with the European
Central Bank and others in action to ease dollar funding strains
a week ago and Obama and Geithner have both pointed to the option
of the ECB backstopping European governments and the banking
system. That idea is viewed by many economists as the key to any
comprehensive solution to the crisis, but resisted by Germany.

Olick - why are cancellations even higher?

"For the past several months, Realtors across the nation have
been reporting an ever-increasing number of cancelled existing
home sale contracts. The latest Realtors Confidence Index now
puts the cancellation rate at 20 percent, way up from the
historical norm of around four to six percent. 'On-time
settlements were reported as declining from 65 percent to 47
percent,' according to the Realtors. It's not why you think, or
at least not why I thought. Inability to get a mortgage was
reported by just 9 percent of respondents to the Realtor survey.
Bigger issues were failed inspections, buyers with cold feet and
adverse economic conditions. I'm sure appraisals figured in there
as well. It begs the question then, if these are just delays or
true cancellations?

Anecdotally, I was doing a report on a residential street in
Northwest DC last week, an area that is still holding its own and
didn't lose much in the housing crash. I was standing in front of
a 'For Sale' sign, when the Realtor from the sign came out of the
house. She wanted to know what we were saying about the
neighborhood, concerned of course that there were any signs of
cracking. I assured her there were not, but asked about the house
she was selling. The Realtor told me it was actually under
contract, after about 35 days on the market. I asked why there
was no 'under contract' sign, which used to be so commonplace
before the 'sold' sign goes up. She said they hadn't had the
inspection yet, although the house looked, at least from the
outside, to be in very good condition. When I asked if she
worried about that, her answer was, 'You never know these days.'
Apparently the jitters are widespread, even in one of the
nation's most secure housing markets.

With so much of the current housing market comprised of
distressed property sales, and with the Realtors unable to
capture so much of that share in their data, uncertainty is
certainly understandable if not mandated. I read a report today
citing Barclay's analyst Stephen Kim of Barclays Capital, who is
upgrading builders and raising price targets on the premise that
we will see a housing 'rebound' in 2012. 'In the absence of a
government homebuyer incentive, prices for non-distressed home
sales have stabilized for almost a year. In our opinion, this is
the most important trend in the housing industry right now,'
notes Kim. 'We are amazed at how little attention it has been
getting from the media and the Street. This stability on the part
of non-distressed prices has occurred despite a very high share
of distressed activity and continued declines in overall prices.'

I'm not sure where he's getting that stabilization. CoreLogic
reported home prices in September, excluding distressed sales,
fell 1.1 percent in September. Their chief economist Mark Fleming
cites a supply and demand imbalance and adds, 'Distressed sales
remain a significant share of homes that do sell and are driving
home prices overall.' We obviously have to be very careful
reading today's housing market tea leaves. There are so many
different indicators and so many different entities reporting
these indicators, that it's often hard to find out what's really
going on. That's why I always go back to the Realtors on the
front lines. They are telling us that this market, distressed or
not, is skittish and undependable. A 20 percent cancellation rate
for existing sales is shocking and does not suggest a rebound on
the horizon. At best, I'm looking for simple stabilization."

Euro down against dollar

The euro edged lower on Tuesday, as traders reacted to news that
Standard & Poor’s (S&P) put 15 euro-zone countries on a
negative “credit watch” late in the prior session. The euro
traded at $1.3369 compared with $1.3386 in North American trade
late Monday. The dollar index, which measures the U.S. unit
against a basket of major rivals, traded at 78.702 compared with
78.654 late Monday. The move by S&P killed a risk rally that had
been fueled in part by a pledge by German Chancellor Angela
Merkel and French President Nicolas Sarkozy to quickly seek a new
treaty that would automatically impose sanctions on violators of
the euro zone’s fiscal rules. The warning applied to triple-A
Germany and France and all other euro members other than Cyprus,
which was already on negative watch, and Greece, whose CC rating
already implies a high probability of default.

Toll Brothers Q4 profits down 70%

Luxury homebuilder Toll Brothers said Tuesday its fourth-quarter
profit fell about 70% to $15 million, or 9 cents per share,
compared to $50.5 million, or 30 cents per share, a year earlier.
The homebuilder said its profit drop is attributed to inventory
and joint venture write-downs, as well as debt retirement
charges. In addition, the firm enjoyed a significant tax benefit
in the fourth-quarter of 2010, which buoyed last year's 4Q
income. The company said without the charges, fourth-quarter
pretax income would have hit $33.9 million, up from $18.1 million
last year. On the other hand, the firm's overall fourth-quarter
revenue grew to $427.8 million from $402.6 million last year.
For its entire 2011 fiscal year, which ended Oct. 31, the company
earned $39.8 million, or 24 cents per share, compared with a loss
of $3.4 million, or 2 cents a share, for fiscal year 2010. The
Horsham, Pa.-based homebuilder experienced another positive in
the fourth quarter with home building deliveries hitting $427.8
million and growing to 757 units, compared to $402.6 million and
700 units, a year earlier. The average fourth-quarter contract
price for a Toll Brothers home hit $606,000, up from $565,000
last year, suggesting values are going up in the high-priced home
segment. In the fourth quarter, the firm signed contracts worth
$390 million, up 24% from last year.

It's Obama's tone, not taxes, says tycoon

Leon Cooperman, a 68-year-old Wall Street veteran, says he is for
higher taxes on the wealthy. He would happily give up his Social
Security checks. He voted for Al Gore in 2000. He says the
special treatment of investment gains, or so-called carried
interest, for private equity and hedge fund managers is
“ridiculous.” He says he even sympathizes, at least to some
extent, with the Occupy Wall Street protesters. And yet, Mr.
Cooperman, a man with a rags-to-riches background who worked at
Goldman Sachs for more than 25 years in the 1970s and 1980s
before starting his own hedge fund, Omega Advisors, which has
minted him an estimated $1.8 billion fortune, is waging a
campaign against President Obama.

Last week, in a widely circulated “open letter” to President
Obama that whizzed around e-mail inboxes of Wall Street and
corporate America, Mr. Cooperman argued that “the divisive,
polarizing tone of your rhetoric is cleaving a widening gulf, at
this point as much visceral as philosophical, between the
downtrodden and those best positioned to help them.” He went
on to say, “To frame the debate as one of rich-and-entitled
versus poor-and-dispossessed is to both miss the point and
further inflame an already incendiary environment.” The letter
comes as President Obama is planning to give a speech on Tuesday
in Osawatomie, Kan., about the economy and the middle class,
following in the path of President Theodore Roosevelt, who
campaigned a century ago in that very city against the wealthy
and big business. Mr. Cooperman’s complaint has less to do
with the substance of taxing the wealthy than it does the
president’s choice of words in promoting it, an emphasis that
he says is “villainizing the American Dream.” While many
executives have complained about what they perceive as the
president’s antibusiness bent, Mr. Cooperman’s letter has
gained credibility and attention in political and business
circles because of his own seemingly liberal stances on taxes and
the like. He said, in an interview, that he had been deluged
with hundreds of e-mails and phone calls about the letter,
“99.9 percent of it positive.”

Mr. Cooperman, who recently signed the Giving Pledge, Bill
Gates’s and Warren Buffett’s effort to press the world’s
billionaires to give away at least half of their wealth, said he
felt he came into his money honestly and said proudly, “I spend
more than 25 times on charity what I spend on myself.” Asked
whether he had received any response from the president for his
letter, he replied with a chuckle, “I’m not optimistic I’ll
hear from him.”

New Jersey foreclosures wait for deliberations

Hundreds of New Jersey foreclosure cases are waiting in the wings
for the state's Supreme Court to issue what will be a landmark
decision in the Garden State. Legal scholars suggest lenders are
waiting to see what the court will do with the U.S. Bank National
Association. Guillaume case before moving forward with thousands
of pending foreclosures. The issue in the case causing lenders
to pause is the question of whether a foreclosure notice is made
invalid because the lender filed a notice of intent to foreclose
with the servicer listed on the notice instead of the lender. In
the original complaint, the Guillaume's argue the lender, U.S.
Bank NA, violated the Fair Foreclosure Act by not including the
lender's information in a spot that ended up containing contact
information for the servicer. Linda Fisher, a professor at Seton
Hall Law School who has been following the case, said the
foreclosure process is "kicked off by filing the notice of intent
to foreclose." Fisher filed an friend-of-the-court brief with the
New Jersey Supreme Court in support of the Gillaumes' claim.
Fisher says the intent to foreclose form has 24 data points,
including the name of the lender and contact information for the

The Guillaumes, who challenged the foreclosure on several fronts,
initially claimed the lender "violated the FFA because although
the notice of intent to foreclose listed plaintiff as the holder
of the note, it did not list plaintiff's address, but rather,
listed the address and telephone number" of the servicer. An
appellate court ruled for the lender and against the plaintiffs
saying "directing the Guillaumes to contact ASC (or the servicer)
fulfilled the purpose of the notice provision under the FFA —
making the debtor aware of the situation, and how and who to
contact to either cure the default or raise potential disputes."
But the case now awaits the New Jersey Supreme Court decision,
causing some lenders to pause before launching foreclosures.

Fisher said the initial notice of intent to foreclose claimed the
servicer was the lender and the holder of the obligation. Later
in the case, the issue became the fact that the lender's name was
listed but with the servicer's address. "The banks are
contending it is OK to enter only the name of the servicer,"
Fisher said. "The Guillaumes are saying the servicer is not a
substitute for the lender because the statute is quite clear, and
it specifically mentions inclusion of the name of the lender."
Banks are likely delaying some of their foreclosure actions in
the state because they want to know how the Supreme Court will
rule on this limited issue, Fisher contends. A rule against the
lender's argument could mean banks will have to review their
intent to foreclose notices. Fisher said if it turns out that
Guillaume forces the 24 data points to be filled out perfectly,
banks will have to retrace their filing steps to ensure they
don't end up facing sanctions.

LPS - house price declines across the board

Lender Processing Services, Inc. (LPS) today announced that its
LPS Applied Analytics division updated its home price index (LPS
HPI) with residential sales concluded during September 2011. The
LPS HPI summarizes home price trends nationwide by tracking sales
each month in more than 13,500 ZIP codes. Within each ZIP code,
the LPS HPI tracks five price levels from low to high. “Home
prices in September were consistent with the seasonal pattern
that has been occurring since 2009,” explained Kyle Lundstedt,
managing director for LPS Applied Analytics. “Each year, prices
have risen in the spring, but revert in autumn to a downward
trend that has not only erased the gains, but has led to an
average 3.7 percent annual drop in prices to date. The partial
data available for October suggests a further approximate decline
of 1.1 percent. Partial data from last month proved to be a good
indicator for September's performance: it showed a preliminary
1.1 percent estimated decline, compared to the 1.2 percent as
shown by the full-month’s data.”

The LPS HPI national average home price for transactions during
September was $202,000 – a decline of 1.2 percent for the
month. As in previous years, this decline follows a 0.9 percent
decline during August. The September national average price is
down 1.8 percent from the average price at the beginning of the
year. LPS HPI average national home prices continue the downward
trend begun after the market peak in June 2006, when the total
value of U.S. housing inventory covered by the LPS HPI stood at
$10.6 trillion. The value has declined 30.2 percent since that
peak to $7.56 trillion. During the period of most rapid price
declines, from June 2007 through December 2008, the LPS HPI
national average home price dropped $56,000 from $282,000, which
corresponds to an average annual decline of 13.8 percent.

Since December 2008, prices have fallen more slowly, interrupted
by brief seasonal intervals of rising prices. During this period
of more slowly declining prices, the national average price has
fallen approximately $24,000 from $226,000. This corresponds to
an average annual decline of 3.7 percent. The national average
home price has declined 4.4 percent over the most recent year to
September 2011. Price changes were consistent across the country
during September, declining in all ZIP codes in the LPS HPI.
Higher-priced homes had somewhat smaller declines: -1.2% percent
for the top 20 percent of homes (prices above $317,000), compared
to -1.4 percent for the bottom 20 percent (below $102,000).

WSJ - top 5 mortgage servicers face charges

Massachusetts Attorney General Martha Coakley sued the five
biggest mortgage servicers Thursday, in the first government
lawsuit targeting all five for alleged improper foreclosure
practices including so-called robo-signing. The 57-page civil
suit, filed in Superior Court in Suffolk County, alleges that the
banks' foreclosure practices were unlawful and deceptive. The
suit, which doesn't specify damages, contends the banks — Bank
of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co.,
Citigroup Inc. and Ally Financial Inc. — "charted a destructive
path by cutting corners and rushing to foreclose on homeowners
without following the rule of law."

The banks have in the past acknowledged problems with their
foreclosure processes, but said they haven't found anyone who was
wrongly foreclosed on. Several said Thursday that they were
disappointed by the suit. The action by Massachusetts comes as
the five large banks and state and federal officials try to
hammer out what some hope could be a $25 billion settlement
related to the handling of troubled mortgage loans. The suit
could be yet another blow to the long-running talks, by
highlighting Massachusetts's objections to terms under
discussion. The Massachusetts lawsuit is likely to be closely
scrutinized by other states looking at what action they might
take if a deal collapses. Other states that have raised
objections include California, Delaware and New York. Still,
Iowa Attorney General Tom Miller, who is spearheading the
multistate effort, said in a statement that he is "optimistic
that we'll settle on terms that will be in the interests of

Online sales reach $6 billion

US shoppers are still spending heavily online after a
record-busting "Cyber Monday," research firm comScore said. On
Cyber Monday itself, sales reached $1.25 billion, the biggest
online shopping day in history. Online sales on Tuesday and
Wednesday also broke $1 billion. Cyber Monday sales topped $1
billion for the first time last year. ComScore says online sales
are up 15% to $18.7 billion in November and the first two days of
December, compared with the same period last year. The holiday
shopping season can make up to 40% of retailers' annual revenue.
This year's holiday shopping has risen with help from discounting
and promotions.

Free shipping also appears to be a big draw, applying to 63% of
sales, up from 52% a year ago. "Consumers have come to expect
free shipping during the holiday promotion periods, and
retailers, in turn, have realized that they must offer this
incentive," said comScore chairman Gian Fulgoni in a statement.
Online shopping accounts for between 8 and 10% of overall holiday
spending, by various estimates. ComScore's spending figures
exclude travel, auctions and large corporate purchases. Spending
on items including clothing, general merchandise, toys and
electronics and in department stores, rose 4.7% to $125 billion
in the Oct. 30 to Nov. 26 period, according to MasterCard
Advisor's SpendingPulse. That includes online buying and spending
in physical stores. - owner/occupiers decline

New Vista Asset Management has published the results of a
three-year study on buyers of foreclosed homes, covering 18
counties hit hardest by the mortgage crisis. The company says
the percentage of REO homes sold to owner-occupant buyers has
decreased in almost every market. In Los Angeles County,
California, for example, owner-occupant REO buyers have dropped
from 80% in 2009 to 60% by the third quarter of 2011. New
Vista’s study uses data extracted from local recorder,
courthouse, and tax assessment records – looking at foreclosed
homes sold by banks, HUD, Fannie Mae, and Freddie Mac – to
determine whether the purchasers were owner-occupants or absentee
owners using single-family homes as rental or vacation
properties. The company began tracking real estate sales
transactions closed in the first quarter of 2009 and includes
consecutive quarterly data through the third quarter of 2011.

“Although, quarter-by-quarter, we have observed some
market-specific increases, over the entire period, owner
occupancy rates for REO sales have broadly weakened,” said
Brian Hurley, New Vista’s president and COO. Hurley notes that
with eleven consecutive quarters of data, the company can look
beyond both seasonality and the temporary impact of demand
stimuli such as the homebuyer tax credit, and observe “a clear
pattern of decline.” Wayne County, Michigan is the only market
of the 18 analyzed that has seen the percentage of owner-occupant
REO buyers increase over the last three years, albeit from
extremely low levels. In 2009, owner-occupants accounted for
nearly 33% of REO purchases in Wayne County. By the third quarter
of this year, their share had risen to just over 37%. Wayne
County was the only market that had an owner occupancy rate for
single-family REO sales below 50% in 2009. By the third quarter
of 2011, owner occupancy rates forREO sales in an additional four
of the studied counties had fallen below 50%, including Maricopa
County, Arizona; Osceola County, Florida; Miami-Dade County,
Florida; and Clark County, Nevada.

Most markets included in the study saw their share of
owner-occupant REO buyers drop by double-digits over the
three-year period. Kevin Stein is with the California
Reinvestment Coalition, a nonprofit organization that advocates
for increased access to credit on behalf of California’s
low-income communities. Commenting on New Vista’s results,
Stein said, “We are troubled by the significant drop in owner
occupant purchases of REO properties in these hard hit markets,
which is no doubt compounded by decreased access to credit and a
failure to repair foreclosed properties to move-in condition.”
Stein says the increased investor acquisition of REOs is
reversing the years of community development progress that
nonprofits have facilitated. “We need to ensure that lenders,
nonprofits and government agencies are working together to give
qualified homebuyers a fair chance to purchase REOproperties and
help stabilize residential neighborhoods,” Stein added.

While New Vista has been tracking the study’s findings since
the first quarter of 2009, company management elected to formally
publish the index in response to a growing focus on
investor-driven solutions to the nation’s residential real
estate crisis. “Several initiatives now under consideration
promise to channel more houses to investors rather than to
owner-occupant purchasers,” Hurley noted. “We timed the
first release of our study to raise awareness of the community
impacts that current REO disposition practices are already
having,” he explained. Hurley says bulk sales, drop-bid
foreclosure auctions, and proposals under review by the Federal
Housing Finance Agency (FHFA) to facilitate the sale of
government-owned REOs for rental purposes all promise to move
more REOs out of local real estate markets. “Before the market
adopts new strategies to address an expected surge in foreclosure
volumes, we wanted the owner-occupancy impact of current
approaches to be well understood,” Hurley said. New Vista’s
“Index of the percentage of Single Family REOProperties Sold to
Owner-Occupant Buyers” will now be published quarterly. The
company plans to increase coverage to include additional markets
in 2012.

Unemployment benefits cost taxpayers billions

Jobless Americans have collected $434 billion in unemployment
benefits over the past four years. Taxpayers have footed $184.7
billion of the tab incurred during the federal government's
unparalleled response to the Great Recession, according to Labor
Department data. State and federal taxes on employers cover the
rest. The cost of continuing this safety net will be the subject
of intense debate in Congress in coming weeks as lawmakers decide
whether to extend the deadline to file for federal benefits
beyond year's end. Keeping this lifeline in place through 2012
would cost $44 billion. Here's how the system works: The jobless
collect up to 26 weeks of state benefits before shifting to the
federal program. Federal benefits consist of up to 53 weeks of
emergency compensation, which is divided into four tiers, and up
to another 20 weeks of extended benefits. Those who reach the
end of their state benefits or federal tier will not be able to
apply for additional benefits unless the deadline to file is
extended. Some 17.6 million Americans have collected federal
benefits over the past four years. The most recent extension,
passed last December, kept 7 million people on the rolls.

While extending the safety net generally has bipartisan support,
lawmakers are deeply divided over how to pay for it. Republicans
have insisted the cost be covered through steps such as spending
reductions, while Democrats want it considered emergency spending
so it would not have to be offset by other measures. "Some
lawmakers say that we cannot afford to extend unemployment
benefits and payroll tax relief in the current fiscal
environment. But I say we can't afford not to," Labor Secretary
Hilda Solis said at a press conference Wednesday. Federal
emergency benefits began in June 2008 and have been increased or
extended eight times since then. When Congress passed a 13-month
extension last December, it was thought by some to be the last.
The cost of jobless benefits has been dropping as the
unemployment rolls contract. Some $156 billion was doled out in
fiscal 2010, boosted in part by a $25 weekly supplement that
ended in the middle of that year. The unemployed collected only
$116 billion in the past fiscal year. As of early November, 6.7
million people were collecting state or federal unemployment
benefits, down from a height of 12.1 million in January 2010.

Fitch downgrades JPMorgan

Eight classes of JPMorgan Chase Commercial Mortgage Securities
Corp. securities certificates were downgraded by Fitch Ratings.
The downgrade involves series 2006-LDP7 commercial mortgage
pass-through securities certificates. They were downgraded based
on greater uncertainty about losses on specially serviced loans.
Fitch said it has designated 60 loans as "loans of concern." The
total pool of loans has an aggregate balance of $3.5 billion,
down from $3.9 billion at issuance. The largest contributor to
the pool's losses is a portfolio secured by four regional malls.
The portfolio is spread across Ohio, Connecticut, Missouri,
California and Colorado, Fitch said. The Midway Mall in Elyria,
Ohio, is one of the largest contributors to the decline in the
portfolio's performance. The mall remains only 62% occupied,
Fitch said. It continues to battle falling income levels, low
market rents, tenant issues and the nation's current economic
woes. A 393,000-square-foot office property in Atlanta is the
second largest contributor to the loss. The property was built in
1980 and ended up in special servicing in June 2010 due to
imminent default after to large tenants left the office property.
CB Richard Ellis is the property manager and leasing agent for
the property. It's occupancy levels remain at 40%.

Delinquencies down, foreclosure inventory sets record high

The October Mortgage Monitor report released by Lender Processing
Services, Inc. (LPS) shows mortgage delinquencies continue their
decline, now nearly 30% off their January 2010 peak. Meanwhile,
foreclosure inventories are on the rise, reaching an all-time
high at the end of October of 4.29% of all active mortgages. The
average days delinquent for loans in foreclosure extended as
well, setting a new record of 631 days since last payment, while
the average days delinquent for loans 90 or more days past due
but not yet in foreclosure decreased for the second consecutive
month. Judicial vs. non-judicial foreclosure processes remain a
significant factor in the reduction of foreclosure pipelines from
state to state, with non-judicial foreclosure inventory
percentages less than half that of judicial states.

This is largely a result of the fact that foreclosure sale rates
in non-judicial states have been proceeding at four to five times
that of judicial. Non-judicial foreclosure states made up the
entirety of the top 10 states with the largest year-over-year
decline in non-current loans percentages. The October data also
showed that mortgage originations are on the rise, reaching
levels not seen since mid-2010. Mortgage prepayment rates have
also spiked, as much of the new origination is related to
borrower refinancing; loans originated in 2009 and later are the
primary drivers of the increase. While FHA origination activity
is down, GSE and FHA originations still account for the vast
majority of all new loans – nearly nine out of every 10 new

Jobs up, looks better than it is

Job creation remained weak in the US during November, with just
120,000 new positions created, though the unemployment rate slid
to 8.6%, a government report showed Friday. The rate fell from
the previous month's 9.0%, a move which in part reflected a drop
in those looking for jobs. The participation rate dropped to 64%,
from 64.2% in October, representing 315,000 fewer job-seekers.
The actual employment level increased by 278,000. The total
amount of those without a job fell to 13.3 million. The drop in
participation rate is significant in that had the labor force
remained steady, the jobless rate would have dropped to 8.8%,
according to Citigroup calculations. If the labor force had
followed trend growth, unemployment would be at 8.9%. "Overall,
the continued modest employment gains reflect an economy that
plods along at an uninspiring pace," Kathy Bostjancic, director
of macroeconomic analysis at The Conference Board, said in a
statement. "These modest job gains are still not enough to propel
economic growth to a sustainable 2%-plus growth path." The
measure some refer to as the "real" unemployment rate, which
counts discouraged workers, also took a fall to 15.6% from 16.2%,
its lowest level since March 2009.

However, economists were treating the rate drops with skepticism.
"When the unemployment rate declines, we want to see both
employment and participation increase as discouraged workers
return to the labor force. Today, we got the former, but not the
latter, making the 0.4% drop look a bit suspect," Neil Dutta, US
economist at Bank of America Merrill Lynch, told clients. "We
would not be surprised to see the unemployment rate give back
some of its decline in the coming month(s)." Average earnings
were essentially flat, up two cents to $23.18 an hour. Private
payrolls increased 140,000, considerably less than a report
earlier this week showing that nongovernment jobs were up by more
than 200,000 for the month. Government payrolls fell 20,000,
including a 4,000 drop in federal positions.

Long-term unemployment remains a big problem: The average
duration for joblessness surged to a record-high 40.9 weeks.
Stagnation in wages also continues, as more employed workers took
on second jobs. There were just under seven million multiple
job-holders for the month, the highest total in 2011 and the most
since May 2010. Traders offered little reaction to the report.
Futures already had been indicating a positive open but lost some
ground in the ensuing minutes after the Labor Department report
hit the tape. "At this pace of job growth, it will be more than
two decades before we get back down to the pre-recession
unemployment rate. Moreover, a shrinking labor force is not the
way we want to see unemployment drop," said Heidi Shierholz,
economist at the Economic Policy Institute. "At this rate of
growth we are looking at a long, long schlep before our sick
labor market recovers."

Massachusetts sues banks

JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.
were among five banks sued by Massachusetts for allegedly
conducting unlawful foreclosures and deceiving homeowners.
Massachusetts Attorney General Martha Coakley filed the lawsuit
yesterday against the three banks, as well as Wells Fargo & Co.
and Ally Financial Inc., in state court in Boston. The banks are
accused of engaging in unfair and deceptive trade practices in
violation of state law, according to the attorney general. “We
believe the stakes could not be higher at this stage of the
game,” Coakley said at a press conference in Boston. “The
foreclosure crisis continues to be at the root of the economic
mess that we find ourselves in and our inability to turn it
around.” State attorneys general across the country have been
negotiating a possible settlement with the five banks that would
resolve a probe into foreclosure practices that began more than a
year ago following disclosures that faulty documents were being
used to seize homes.

Wells Fargo Chairman and Chief Executive Officer John Stumpf said
that he is disappointed the lawsuit was filed. Wells Fargo is
based in San Francisco. “We've worked hard to come to an
agreement that I think would be good for the country and good for
housing,” he said. “We can work through that better together
than working it out in court.” Gina Proia, a spokeswoman for
Detroit-based Ally, said its GMAC Mortgage unit, which was named
as a defendant, will “vigorously defend” itself against the
lawsuit and has worked “in good faith” with Coakley's office
during the past year to discuss mortgage servicing and ways to
assist borrowers. Tom Kelly, a spokesman for New York-based
JPMorgan, said the bank is disappointed Coakley filed the lawsuit
while negotiations with state and federal officials continue.
“We continue to believe that collaborative resolution rather
than continued litigation will most quickly heal the housing
market and help drive economic recovery,” Lawrence Grayson, a
spokesman for Charlotte, North Carolina-based Bank of America,
said in a statement. Citigroup hasn't had time to review the
lawsuit, Mark Rodgers, a spokesman for the New York-based bank,
said in an e- mail. The bank has been cooperating with the
attorney general, he said.

US Manufacturers close competitiveness gap with China

The US economy may still be struggling to recover from a
recession that began three years ago, but there is a silver
lining. According to business consulting firm AlixPartners, a
weak dollar and rising wages in China have helped US
manufacturers close the competitiveness gap with their Chinese
counterparts for the first time since 2007. AlixPartners said it
compared the total cost to produce a variety of manufactured
goods in the US with 12 other countries, including China. It
found that Mexico remained the cheapest place for US companies
looking to outsource manufacturing. The firm tracked changes in
seven key cost drivers including exchange rates, freight costs,
labor and raw materials. Naumann said China's competitiveness
had slipped because of rising wages and the strengthening of the
yuan, which has gained 4% against the dollar this year. "If the
(dollar) continues to depreciate even if only at 5% per year, and
if you're having wage inflation of 20% or so per year in China,
plus you have some increase in freight costs, actually by 2015 -
so in only 4 or 5 years - the US and China could actually be on
par, in terms of competitiveness," Naumann added. China's
manufacturing sector has already been overtaken by India, Russia
and Vietnam on cost competitiveness, according to AlixPartners'

Holiday moratorium on foreclosures

Fannie Mae, Freddie Mac and several large mortgage lenders have
pledged not to foreclose on delinquent borrowers during the
Christmas season. For homeowners with loans through Fannie Mae
and Freddie Mac, the moratorium will run from Dec. 19 to Jan. 2.
During this time, legal and administrative proceedings for
evictions may continue, but families will be allowed to stay in
their homes, Fannie said in a statement. "No family should have
to give up their home during this holiday season," said Terry
Edwards, an executive vice president for Fannie Mae. Among some
of the major banks that offer mortgage loans, Chase Mortgage said
it will not evict anyone between Dec. 22 and Jan. 2. Wells Fargo
will also suspend evictions during that period, but will not shut
down its eviction machinery entirely. The bank said it will
observe the moratorium on foreclosed properties in its own
portfolio but for loans it services for other lenders
"foreclosure-related actions may still occur." Bank of America
said that it would "avoid foreclosure sales or displacement of
homeowners or tenants around the Thanksgiving and Christmas
holidays." However, that policy only applies to loans the bank
itself owns. Like Wells Fargo, it will also honor the wishes of
the owners of the loans it services, which could mean moving
forward with certain foreclosures.

A holiday halt on foreclosures by the major mortgage lenders
could affect tens of thousands of homeowners. An average of
89,000 foreclosure auctions a month have been scheduled this
year, according to RealtyTrac. Once a home has gone through that
process, eviction is the next step. There could be a small
handful of borrowers who might benefit permanently from the
suspension, according to Daren Blomquist, a spokesman for
RealtyTrac. Sometimes, albeit very rarely, a Christmas miracle
will occur where a borrower finds the cash to get current on
their mortgage again and keep their home. For the overwhelming
majority of borrowers in default, however, "It's a temporary
reprieve, a symbolic gesture to help people out during the
holidays," said Blomquist. Then, come the New Year, everyone
gets back to business, including mortgage lenders.

Foreclosure crisis only halfway over?

A new analysis suggests that the tide of home foreclosures isn’t
going to recede soon. The report from the Center for Responsible
Lending, “Lost Ground, 2011,” finds that at least 2.7 million
mortgages loaned from 2004 through 2008, or about 6%, have ended
in foreclosure and that nearly 4 million more home loans (roughly
8%) from the same period remain at serious risk. Put another
way, “The nation is not even halfway through the foreclosure
crisis,” says the report, which analyzed 27 million mortgages
made over the five years. Across the country, low- and
moderate-income neighborhoods and neighborhoods with high
concentrations of minorities have been hit especially hard, the
report found. The report also noted that certain types of loans
have much higher rates of completed foreclosures and serious
delinquencies. They include loans originated by brokers; hybrid
adjustable-rate mortgages, option ARMs, loans with prepayment
penalties and loans with high interest rates (subprime). African
Americans and Latinos were more likely to receive a high-cost
mortgage with risky features, regardless of their credit. For
example, among borrowers with good credit (a FICO score of over
660), African-Americans and Latinos received a high-interest-rate
loan more than three times as often as white borrowers.

Jobless claims jump back over 400,000

Weekly applications for unemployment benefits rose 6,000 to a
seasonally adjusted 402,000, the Labor Department said Thursday.
Applications had been below 400,000 for three straight weeks.
The four-week average, a less volatile measure, was mostly
unchanged at slightly below 400,000. The average fell to a
seven-month low two weeks ago. Weekly applications had been
declining for two months. Applications would need to stay below
375,000 consistently to push down the unemployment rate
significantly. They haven't been at that level since February.
The report comes one day before the government reports on job
growth in November. Economists project that employers added a net
125,000 jobs, while the unemployment rate stayed at 9% for the
second straight month. While the job growth would be an
improvement from October, when the economy added just 80,000
jobs, it's still barely enough to keep pace with population
growth. Some economists are more optimistic after payroll
provider ADP said Wednesday that companies added 206,000 workers
last month, the most this year. That survey doesn't include
government agencies, which have been cutting jobs.

WSJ - home prices decline

Home prices declined in September and are poised for a grim
winter as banks step up their efforts to take back and sell
foreclosed properties. Prices fell 0.6% from August, according
to the widely watched Standard & Poor's/Case-Shiller index of 20
major metropolitan areas, breaking a five-month run of increases
during the spring and summer, when higher sales volumes typically
firm up prices. For the third quarter, prices were down 3.9%
nationwide compared with a year earlier, a slight improvement
from the 5.8% annual decline recorded at the end of June,
according to the Case-Shiller National Index.

Prices remain under pressure as the housing market continues to
digest high volumes of foreclosed and other "distressed"
properties that tend to sell at a discount. Though sales picked
up at the end of the summer, analysts said buyers were only
closing deals they perceive as a bargain, which could help
explain why prices are sliding again. "Buyers don't want to tell
their friends 'I bought a home.' People look at you sideways. But
if it's a foreclosure, they pat you on the back," said John
Burns, president of a home-building consulting firm in Irvine,
Calif. "People need to feel like they're getting a great deal."
Prices fell in September from the previous month in all but three
of the 20 cities, with a 1.2% gain in Washington, D.C., and 0.1%
gains reported in New York and Portland, Ore. For the year,
prices were up in just two markets: Detroit reported a 3.7% gain,
while Washington posted a 1% increase. A different home-price
index, released Tuesday by the Federal Housing Finance Agency,
found that prices in September were up 0.9% from August on a
seasonally adjusted basis but were down by 3.7% from year ago.
The FHFA index captures mortgages financed by Fannie Mae and
Freddie Mac.

Black Friday boosts retail

With a strong start to the holiday season, most retailers were
reporting better-than-expected same-stores sales in November.
According to Thomson Reuters, analysts on average are expecting
sales at stores open at least 12 months to rise 3.1% from a year
ago. But retailers are up against strong performances last year,
when they gained, on average, 5.5% during the month. Macy's,
Costco Wholesale, Limited Brands, and teen retailer Buckle all
reported sales gains that topped Wall Street's estimates. At
Costco, same-store sales rose 9% topping analysts' estimates of
6.5% growth. Although the warehouse club operator was helped by
higher gasoline prices, even without that boost same-store sales
were strong. Without fuel, same-store sales rose 7%. The
Limited, the parent of Victoria's Secret and Bath & Body Works,
said same-store sales rose 7%, comfortably outpacing analysts'
estimates, which called for a 4.4% gain. However, there were
some notable shortfalls. Discount retailer Target said its
same-store sales rose 1.8%, short of analysts' estimates, which
called for 2.8% gain, according to Thomson Reuters.

Olick - average foreclosure time sets a record

"Foreclosures are setting new records again, this time not in
their overall numbers, but in the time it is taking for all of
these properties to be processed through the legal system. The
average loan in foreclosure has now been delinquent a record 631
days, according to a new report from Florida-based Lender
Processing Services. The after effects of the so-called
'robo-signing' foreclosure paperwork scandal, now more than a
year old, continue to plague states which require these cases to
go before a judge. The differences in processing times are
blatant when you compare judicial versus non-judicial states.
Non-judicial state foreclosures inventories are less than half
those of judicial states, and foreclosure sale rates in
non-judicial states are four to five times that of judicial
states. Judges are starting to ramp up the process. Bank
repossessions actually surged in October in many judicial states,
up 48% in New Jersey and up 73% in Indiana month-to-month,
according to RealtyTrac. Still the backlog is still enormous.
Overall foreclosure inventory is at an all-time high, 4.29% of
all active loans, according to LPS. 'The discrepancy will go on
in perpetuity, as there always has been a difference between
judicial and non-judicial timelines,' said Kyle Lundstedt,
managing director of LPS Applied Analytics. 'Even prior to the
worst of the crisis, loans were 4-5 months more delinquent in
judicial states at time of foreclosure sale. The number today is
more like 8 months, but will return to the 4-5 month difference
depending on when and how fast foreclosure sales occur.'

A record-high inventory of foreclosures in process does not bode
well for the near future of the housing recovery. All those
distressed properties will sell at a deep discount, likely
bringing down the prices of surrounding homes. They will also
add to already historically high existing home inventories, while
demand is still weak. While there is considerable investor demand
for distressed properties, new foreclosures are still
outnumbering foreclosure sales by over 3:1. In addition to the
'robo-signing' delays, we are now beginning to see the effects of
ineffective loan modifications. Repeat foreclosures made up
nearly 45% of new foreclosures in October. Of the 2.1 million
modifications since the start of 2008 more than 10% were in
foreclosure with another 27.4% delinquent 30 or more days, as of
the end of the third quarter of this year, according to the
Office of the Comptroller of the Currency. Lundstedt said
foreclosure moratoria, process/documentation reviews, evaluation
for loss mitigation and bankruptcies make up the rest of the
repeat foreclosures. As the mortgage market continues to work
through the backlog of troubled loans, looking forward, loans
originated in 2010 and 2011 are now the best performers on
record, thanks to tighter credit requirements. Of course that
begs the question: Did the pendulum swing farther than necessary
to the conservative side? Is underwriting now unnecessarily

Troops foreclosures investigated

The US Treasury Department is investigating whether Bank of
America, Wells Fargo and eight other major banks may have
illegally foreclosed on 4,500 active-duty servicemen and women.
Bank of America has agreed to review more than 2,400 foreclosures
of homeowners who indicated they were eligible for relief under a
federal law called the Service members Civil Relief Act,
according to the Treasury's Office of the Comptroller of the
Currency. Wells Fargo has agreed to review 871 foreclosures of
homeowners who indicated they were eligible under the act. The
law is intended to postpone or suspend certain civil obligations
to allow active-duty service members to devote their full
attention to their military duty. The other banks being
investigated are Aurora Bank, Citibank, EverBank, HSBC, MetLife
Bank, OneWest, Sovereign and US Bank. Bank of America spokesman
Rick Simon said it's unlikely that there will be a large number
of improper foreclosures. Wells Fargo officials say the
investigation doesn't mean anything improper was done.

See you at the top!
Chris McLaughlin


Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit

* Owner of one of Florida's largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris' 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

Mortgage applications down

Mortgage applications decreased 11.7% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending November
25, 2011. This week’s results include an adjustment to account
for the Thanksgiving holiday. The Market Composite Index, a
measure of mortgage loan application volume, decreased 11.7% on a
seasonally adjusted basis from one week earlier. On an unadjusted
basis, the Index decreased 39.0% compared with the previous week.
The Refinance Index decreased 15.3% from the previous week. The
seasonally adjusted Purchase Index decreased 0.8% from one week
earlier. The unadjusted Purchase Index decreased 33.7% compared
with the previous week and was 18.2% lower than the same week one
year ago. The four week moving average for the seasonally
adjusted Market Index is down 3.29%. The four week moving average
is up 2.37% for the seasonally adjusted Purchase Index, while
this average is down 4.92% for the Refinance Index. The
refinance share of mortgage activity decreased to 73.9% of total
applications from 75.9% the previous week.

The refinance share of mortgage activity is at the lowest level
since July 2011. The adjustable-rate mortgage (ARM) share of
activity increased to 5.8% from 5.7% of total applications from
the previous week. During the month of October, the investor
share of applications for home purchase was at 6.1%, a slight
increase from 6.0% in September. This change was led by an
increase in the New England region. In addition, the share of
purchase mortgages for second homes decreased to 5.6% in October
from 5.8% in September.

Jobs up, service sector leads

ADP and Macroeconomic Advisors reported that service providers
added 178,000 positions. The goods-producing sector saw a
28,000-job rise, while manufacturing employment increased by
7,000 and construction added 16,000. The report also said the
estimated gain in employment from September to October was
revised up to 130,000 from the initially reported 110,000. At
the same time, the number of planned layoffs at US firms edged
down marginally in November, though job cuts for the year have
surpassed 2010's total, a report on Wednesday showed. Employers
announced 42,474 planned job cuts this month, down 0.7% from
42,759 in October, according to the report from consultants
Challenger, Gray & Christmas Inc. November's job cuts were down
12.8% from the same time a year ago when 48,711 layoffs were
announced. But with just one month left in the year, employers
have announced 564,297 cuts for 2011, exceeding 2010's total of
529,973. Cuts in the government sector accounted for 44% of
November's layoffs, the eighth time this year the sector has led
all others in monthly job cuts. Of the 18,508 government job
cuts announced this month, 13,500 were the result of civilian
workforce cuts made by the United States Air Force. Hiring plans
fell sharply to 63,527 from 159,177 the month before. Most of
November's gains were from seasonal workers being hired by UPS.
The report comes two days ahead of the key US jobs report, which
is forecast to show the economy added 122,000 in November.

NAR - pending sales up

Pending home sales rose strongly in October and remain above
year-ago levels, according to the National Association of
Realtors (NAR). The Pending Home Sales Index (PHSI), a
forward-looking indicator based on contract signings, surged
10.4% to 93.3 in October from 84.5 in September and is 9.2% above
October 2010 when it stood at 85.5. The data reflects contracts
but not closings. The PHSI in the Northeast surged 17.7% to 71.3
in October and is 3.4% above October 2010. In the Midwest the
index jumped 24.1% to 88.7 in October and remains 13.2% above a
year ago. Pending home sales in the South rose 8.6% in October to
an index of 99.5 and are 9.7% higher than October 2010. In the
West the index slipped 0.3% to 105.5 in October but is 8.1% above
a year ago.

S&P cuts ratings for several banks

Standard & Poor's reduced its credit ratings on 15 big banking
companies, mostly in the Europe and United States, on Tuesday as
the result of a sweeping overhaul of its ratings criteria.
JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman
Sachs Group, Morgan Stanley, Barclays, HSBC Holdings and UBS were
among the banks that had their ratings reduced by one notch each.
A notch is one third of a letter rating. S&P also left the
ratings of 20 banks as they were and raised the ratings of two in
announcing results from its new ratings criteria to 37 of the
world's biggest banking companies. The agency also updated
ratings for dozens of bank subsidiaries of the companies.
Although S&P began warning the markets more than a year ago that
it was revising its ratings, the announcement comes at a time
when the markets for bank debts are fragile.

S&P's overhaul is part of a broad, multi-year drive by the agency
to improve its products and repair its reputation, which was
badly tarnished by having wrongly put triple-A ratings on
securities backed by subprime mortgages. The agency is owned by
by McGraw-Hill Companies. In response to growing pressure on
their credit ratings, some banks have updated contingency plans
for a downgrade. They have also refreshed disclosures on the
potential impact they may suffer through ratings triggers built
into obligations under existing derivatives contracts, funding
commitments and borrowing arrangements. Spokespersons for Bank
of America, JPMorgan, Goldman Sachs, Morgan Stanley declined to

Olick - prices, ownership down

"Home prices across the nation are now right back where they were
at the beginning of 2003. All that was gained is largely now
lost, and the effect on home ownership could continue for
decades. 'Consumer attitudes have gotten a lot more negative
about long-term commitment,' said Standard and Poors' David
Blitzer, after reporting home prices through September had fallen
a deeper-than-expected 3.9% compared to the third quarter of
2010. 'They dropped to new lows. This takes them below the point
we saw in 2009, where briefly we all thought this thing was about
to turn around.' And that's the problem. Every time we think
things are turning around in the housing market, we get hit with
some new problem, like last year's so-called 'robo-signing'
foreclosure paperwork scandal, which managed to stall the
cleansing of distress in the market for over a year. Now that
foreclosures are ramping up again, prices are coming down again.

All this could push home ownership down to levels not seen at
least since before the Census began tracking this data in 1963.
Home ownership soared to 70% in 2005, but it could fall to 62% by
2015, according to the number crunchers at John Burns Real Estate
Consulting. They suggest that the effect of foreclosures drops
home ownership 5.6%, and cyclical trends, like poor consumer
confidence, tightening mortgage credit and the weak economy drop
it 3%. Positive demographic trends would only offset that by
0.7%. 'People's memories take a while to fade,' says John Burns.
'It [also] takes a while to rebuild your balance sheet after a
recession, and that's what many people need to do before they buy
homes again. Homeowners need to build back up to have a down
payment for their next house, and renters will need to save more
than before to become homeowners.'

Burns believes home ownership will return by 2025 to around 67%,
as previously foreclosed borrowers return to the housing market,
cyclical trends improve and positive demographics start to carry
more weight. One thing Burns doesn't mention, though, is
negative equity, or borrowers who owe more on their mortgages
than their homes are worth. 'It's not just negative equity that
we often focus on, but it's also insufficient equity. All the
people who have those primary loans that are somewhere between 80
and 100% LTV (loan-to-value) also basically don't have don't have
access to the credit markets,' notes Mark Flemming of CoreLogic,
which today reported negative equity at 22.1% of all homes with a
mortgage at the end of the third quarter. As home prices refuse
to stabilize, and in fact continue to fall, negative equity will
only increase. The vast majority of the ten plus million people
who are underwater are still paying their mortgages, but they are
deeply underwater, 30% and higher. That will take a long time to
correct, and will stagnate much of the market for years to come,
as these owners are unable to sell. Which leaves us to ask, is a
62% home ownership rate so bad? It's still far higher than in
most European countries. Why is home ownership so intrinsic to
the 'American Dream?' I'll leave that to you faithful readers to

Central banks boost liquidity

Major central banks around the globe took coordinated action
Wednesday to ease the strains on the world's financial system,
saying they would make it easier for banks to get dollars if they
need them. The European Central Bank, US Federal Reserve, the
Bank of England and the central banks of Canada, Japan and
Switzerland are all taking part. As Europe's sovereign debt
crisis has spread, the global financial system is showing signs
of entering another credit crunch like the one that followed the
2008 collapse of US investment bank Lehman Brothers. The
possibility that one or more European governments might default
have raised fears of a shock to the global financial system that
would lead to severe losses for banks, recessions in the US and
Europe, and a stranglehold on lending. "The purpose of these
actions is to ease strains in financial markets and thereby
mitigate the effects of such strains on the supply of credit to
households and businesses and so help foster economic activity,"
the banks said in a joint statement. The central banks agreed to
reduce the cost of temporary dollar loans they offer to banks —
called liquidity swaps — by a half percentage point. The new,
lower rate will be applied to all central bank operations
starting on Monday.

Whistle blower found dead

A notary public who signed tens of thousands of false documents
in a massive foreclosure scam before blowing the whistle on the
scandal has been found dead in her Las Vegas home. NBC station
KSNV of Las Vegas reported that the woman, Tracy Lawrence, 43,
was scheduled to be sentenced Monday morning after she pleaded
guilty this month to notarizing the signature of an individual
not in her presence. She failed to show up for her hearing, and
police found her body at her home later in the day. It could not
immediately be determined whether Lawrence, who faced up to one
year in jail and a fine of up to $2,000, died of suicide or of
natural causes, KSNV reported. Detectives said they had ruled out
homicide. Lawrence came forward earlier this month and blew the
whistle on the operation, in which title officers Gary Trafford,
49, of Irvine, Calif., and Geraldine Sheppard, 62, of Santa Ana,
Calif. — who worked for a Florida processing company used by
most major banks to process repossessions — allegedly forged
signatures on tens of thousands of default notices from 2005 to

Trafford and Sheppard were charged two weeks ago with 606 counts
of offering false instruments for recording, false certification
on certain instruments and notarization of the signature of a
person not in the presence of a notary public. Police said at
the time that the alleged scam had thrown into question the
legality of most Las Vegas home foreclosures in the past few
years, leaving many people living in foreclosed-upon homes that
they unknowingly don't actually own. "I would suggest you review
your documents and bring them to an expert and an attorney," said
John Kelleher, chief deputy attorney general for Nevada's fraud

WSJ - now is the best time to buy

The Wall Street Journal's third-quarter survey of housing-market
conditions in 28 of the nation's largest metropolitan areas found
that home values declined in all but five markets compared with
the second quarter, according to data from Zillow Inc. Meanwhile,
rent levels have risen briskly across the country and mortgage
rates, hovering around 4%, are the lowest in six decades. As a
result, monthly mortgage payments on the median priced
home—including taxes and insurance—are lower than the average
rent levels in 12 metro areas, according to data compiled for The
Wall Street Journal by Marcus & Millichap, a real-estate
brokerage that tracked 27 metro areas. It remains less expensive
to rent than to buy in 15 cities. In Atlanta, which had the most
favorable values for owning versus renting, the monthly payment
on the average home was $539 assuming a 20% down payment during
the third quarter. By contrast, the average asking rent stood at
$840, according to the Marcus & Millichap data.

Other cities where owning is now cheaper than renting include
Detroit, Minneapolis, Orlando, Las Vegas, Miami, St. Louis,
Chicago and Phoenix. Home ownership is also looking more
affordable because after several years of declines, apartment
rents will rise by around 4% this year, says Mr. Nadji. He says
rents are poised "to pick up even more momentum across the
country next year." Even cities where it is still cheaper to
rent than own have seen big boosts in affordability. In San
Diego, the monthly cost of owning a home has averaged around 83%
more than renting over the past two decades. During the third
quarter, owning was 22% more expensive than renting, according to
John Burns Real Estate Consulting.

Mortgage rates are a big reason why affordability continues to
improve. In 1991, a $1,700 mortgage payment allowed a borrower to
take out a $200,000 mortgage. Today, it gets that homeowner a
$350,000 loan, a 77% increase in borrowing power, says Dan Green,
a loan officer with Waterstone Mortgage, in Cincinnati.
Affordability could continue to improve as prices slide even
lower in coming months. Price declines are likely because the
share of "distressed" sales, including bank-owned foreclosures,
tend to rise in the winter, when traditional sales activity
cools. Banks are often much quicker to cut prices to unload
properties quickly, which means that the greater the share of
"distressed" sales, the more prices tend to fall.

One hopeful sign is that inventories have fallen from their
bloated levels of one year ago. All 28 cities in The Wall Street
Journal's latest survey saw homes listed for sale fall from one
year ago, when markets were reeling with a substantial overhang
of properties amid a big drop in demand. Visible inventory was
down sharply in several markets, including by almost half in
Miami and 40% in Phoenix. Low inventories have spurred more
bidding wars at the low end of the market as investors compete
for homes that they can convert into rentals. In Sacramento, it
would take just 2.5 months to sell the listed inventory at the
current sales pace. Las Vegas has a 4.3 month supply of
inventory, according to John Burns Real Estate Consulting. But
the potential supply of homes is much bigger because banks have
yet to process hundreds of thousands of potential foreclosures.

Black Friday sales boom

Sales rose an estimated 6.6% to a record $11.4 billion on Black
Friday, typically the busiest shopping day of the year for
Americans, while the traffic at stores rose 5.1%, according to
ShopperTrak. The day's sales growth was the strongest percentage
gain since 2007, when sales rose 8.3% on the day after
Thanksgiving, said Ed Marcheselli, chief marketing officer at
ShopperTrak, which monitors retail traffic. As usual on Black
Friday, retailers used deep discounts on popular items such as
toys and televisions to lure shoppers as the holiday shopping
season began. Some started sales as early as Thanksgiving night
to get a jump on their rivals. While the Black Friday rise was a
"positive indicator for the holiday season," Marcheselli
cautioned it is just one day. ShopperTrak has estimated that
sales for all of November and December will rise about 3 to 3.3%.
The National Retail Federation, an industry trade group, expects
152 million people to hit stores this weekend, up 10.1% from last
year. But it expects sales for the full November-December holiday
season to rise just 2.8%, well below the rise of 5.2% in 2010. - mortgage rates down

The 30-year fixed-mortgage rate has averaged at or below 4% for
four consecutive weeks now. For the week ending November 23,
Freddie Mac’s study puts the average 30-year rate at 3.98% (0.7
point). That’s down from 4.00% the week prior. The only time
Freddie has recorded a lower 30-year rate average was for the
week of October 6, 2011, when it came in at 3.94%. The 15-year
fixed-rate mortgage posted an average of 3.30% (0.7 point) in
Freddie Mac’s latest survey. It was 3.31% last week. The
5-year ARM is averaging 2.91% (0.6 point), down from 2.97% last
week. The 1-year ARM slipped from 2.98% to 2.79% (0.6 point) this
week. Rates for both ARM terms are the lowest ever recorded by
the GSE. “Mortgage rates eased slightly this week with
fixed-rate loans hovering above all-time lows and ARMs reaching a
new nadir,” commented Frank Nothaft, Freddie Mac’s chief
economist. He says the high-degree of home-buyer affordability
in recent months translated into a 1.4% pickup in existing home
sales during October, as measured by the National Association of
Realtors. Nothaft noted, however, that the trade group also
reported a sharp increase in contract cancellations in October,
with a third of its members seeing at least one contract fall
through during the month. This “restrained sales from achieving
a stronger rebound,” according to Nothaft.

Morgan Stanley cuts growth forecast

The continuing uncertainty over debt troubles in Europe and the
US has increased the downside risks to global growth, according
to Morgan Stanley. The bank downgraded its forecast for global
growth next year to 3.5% from 3.8%, just three and a half months
after it cut its forecast from 4.5%. "Our economics team in
Europe now expects a recession in Europe while the US economy is
expected to continue growing below its trend," said Morgan
Stanley. It also cut its 2012 growth estimate for Asia ex-Japan
to 6.9% from 7.3%. "Since we downgraded our regional growth
outlook in August 2011, we have been constantly worried about the
increasing downside risks to growth. In addition to further
evidence of weakening domestic demand, the external environment
in Europe has made us more concerned about the region's growth
outlook," economists at Morgan Stanley said in a research note

Even Asia, which has so far escaped the global slowdown is likely
to be dragged down, according to Morgan Stanley. The bank noted
that the regions' deep trade and financial linkages with the rest
of the world made it vulnerable to deep shocks in the global
economy. "The prospects of further fiscal tightening and weaker
domestic demand in Europe will translate into weaker external
demand growth for the region," it said. "The slowdown in final
demand in the developed world will likely be amplified on the
region's cross-border production network, leading to a
significant slowdown in export growth across the region in 2012."
Morgan Stanley noted this was already starting to happen. Asian
exports, which "have been flat on a sequential basis since Mar
2011, have also begun to decline on a sequential basis in the
last two months." Asia's domestic indicators, such as auto,
retail and property sales as well as manufacturing activity (PMI)
were also pointing to a deceleration, the bank said.

Home prices to fall another 6%?

Analysts with JPMorgan claim home prices will fall another 4% by
year-end, resulting in a 35% peak-to-trough decline once a bottom
is reached. When looking at just non-agency residential
mortgage-backed securities, the report says "market volatility,
lack of liquidity and stagnant fundamentals" will remain drags on
the entire segment in 2012. In non-agency residential
mortgage-backed securities, the authors also noted slowing
activity on the modification front. "We continue to recommend
fixed-rates and select seasoned hybrids," the report said. The
JPMorgan report also is careful when forecasting the performance
of commercial mortgage-backed securities in 2012. "Our outlook
for 2012 is cautiously optimistic, as market conditions continue
to weigh on what we believe remains cheap fundamental credit
risk. Private label and agency CMBS supply should reach $35
billion and $32 billion, respectively," the report said.

Short sale incentives

Bank of America is testing Florida's foreclosure waters with an
incentive program for defaulting homeowners to "short sell" their
homes instead of enduring a foreclosure, which can take years.
Guidelines for Bank of America's new Florida Enhanced Short Sale
Relocation Assistance program state that a borrower may use the
incentive to pay off existing liens or for relocation expenses.
FHA, Ginnie Mae, VA and USDA loans are not eligible. Details are
available by calling 1-866-880-1232.

Short-sale incentives are an outgrowth of earlier, "cash for
keys" programs offered by lenders and real-estate companies.
Also, the US Treasury Department has tried to boost the number of
short sales with its Home Affordable Foreclosure Alternatives
program, which provides $3,000 for borrower-relocation
assistance, $1,500 for servicers to cover administrative and
processing costs, and as much as $2,000 for investors who meet
certain requirements.

Other programs currently available:

- Wells Fargo offers incentives of $10,000 to $20,000 to certain
homeowners who opt for a short sale or who transfer a home's
title back to the bank. The program is aimed at properties in
Florida and other states known for protracted, judicial
foreclosures. The money is available only on first-lien loans
that the company owns, which is about 20% of its portfolio.
Details: 1-800-678-7986.

- JPMorgan Chase has not reported how much it offers for
short-sale incentives, though real-estate agents have reported
sellers getting $20,000. The lender also has declined to specify
how it determines the amount of its incentives. Details:

- Citibank has reported it offers an average of $12,000 for
borrowers when it owns the mortgage. The amount is determined
upfront and varies depending on a borrower's financial
circumstances and mortgage-payment history. The money is
disbursed when the short sale closes. Details: 1-866-272-4749.

More regulations on the way

US regulators on Tuesday are set to give nervous insurance
companies, mutual funds and other big players in financial
markets a better idea of whether they will be tapped for the same
type of additional government scrutiny facing large US banks. On
Tuesday, the Financial Stability Oversight Council is scheduled
to release a new proposal on how it will determine which non-bank
firms are important enough to the financial system that they
merit greater oversight by the Federal Reserve. Also on Tuesday,
banking regulators are scheduled to vote on a proposal banning
most proprietary trading done by banks, known as the Volcker
rule. Both rules are parts of the 2010 Dodd-Frank financial
oversight law. Companies that are tapped for greater Fed
supervision will be designated systemically important financial
institutions (SIFIs), and will be subject to new capital and
liquidity rules. They will also be required to draft detailed
plans on how they could be broken up if the company falters and
is seized by the government.

Olick - where to find demand

"Given record low interest rates and still-falling home prices,
you would think housing demand would be surging, but these are
strange, strange times. Difficult credit conditions, combined
with a steep drop in consumer confidence have cancelled out
housing's positives. Most concerning is a generational shift in
housing demand. While the overall home ownership rate fell a
little more than one percentage point over the last decade, the
numbers were much worse for younger Americans. 'Particularly
hard hit were households headed by those age 25 to 54, who
experienced homeownership rate declines ranging from 3.5 to 3.9
percentage points,' according to a Fannie Mae analysis of new
Census data. The change in home ownership has been
geographically widespread. As home prices seem to be taking a
turn for the worse again now, potentially a triple dip, consumer
confidence in housing has fallen right in line. Fannie Mae's
September housing survey, 'showed a marked deterioration in
consumer expectations of home prices over the next year—their
weakest outlook since monthly tracking began in June 2010,' said
Doug Duncan, vice president and chief economist of Fannie Mae.
This even as negative headlines over the potential US debt crisis
abated in September. Oddly, this pessimism came at the same time
that the share of consumers expecting mortgage rates to go up
dropped sharply to the lowest level recorded. That is further
evidence that even record-low mortgage rates are having a minimal
effect on any housing recovery.

If housing demand cannot be spurred by low interest rates, low
prices or even a slightly brighter economic picture, then where
can we find it? For now, it's with investors. Investors do not
rely on credit as much as the general population and the
potential revenue stream from increased rental demand can
overcome fears of any further declines in home values. As
leaders in the industry and government mull potential new housing
incentives and fixes, they should focus more on investors. With
little newly-built rental inventory coming to market and
still-surging rental demand, investors can help on many levels,
sopping up distressed supply and providing more housing to limit
the surge in rent rates."

60% chance of recession

The bond market indicator that has predicted every US recession
since 1970 shows that the economy has about a 60% chance of
contracting within 12 months. The so-called Treasury yield
curve, adjusted for distortions caused by the Federal Reserve’s
record low zero to 0.25% target interest rate for overnight loans
between banks, shows that two-year notes yield 20 basis points,
or 0.20 percentage point, less than five-year notes, according to
Bank of America Corp. research. The unadjusted gap of 79 basis
points at the end of last week indicates the chance of recession
at about 15%.

Short-term rates have been higher than longer-term yields, or
inverted, before each of the seven recessions since 1970.
Unemployment has held at or above 9% every month except two since
May 2009, including a reading of 9.1% in September. “The
adjusted curve is giving a powerful signal for an upcoming US
recession,” said Ruslan Bikbov, a fixed-income strategist in
New York at Bank of America, one of the 22 primary dealers of US
government securities that trade with the Fed. “If that
happens, the Fed’s target rate could remain near zero beyond
2014,” more than a year longer than the central bank has
indicated, he said in an interview on Oct. 3.

Bank of America’s research is sending the same message as the
Economic Cycle Research Institute and Bill Gross, manager of the
world’s biggest bond fund, which say the US may be headed into
a decline. Fed Chairman Ben S. Bernanke said last week in
testimony to Congress that the central bank can take further
steps to sustain a recovery that’s “close to faltering”
after almost three-years of near-zero interest rates and $2.35
trillion of bond purchases. The Organization for Economic
Cooperation and Development cut its forecasts for the US last
month, saying the $15 trillion economy likely grew 1.1% in the
third quarter and will expand just 0.4% in the fourth.

WSJ - US gambles with mortgage retreat

Three years after virtually nationalizing the US mortgage market,
the government has embarked on a pullback to see whether private
industry picks up the slack. Some people in the housing industry
worry that Washington's move will cause fresh pain in many
regions where demand has yet to recover amid the sluggish
economy. At issue are the loan limits that Congress expanded in
2008, allowing Fannie Mae and Freddie Mac to buy mortgages that
exceeded the national cap of $417,000. When the mortgage market
melted down four years ago and sent private mortgage investors
fleeing, interest rates rose sharply on "jumbo" mortgages—those
too large for backing by Fannie, Freddie or agencies such as the
Federal Housing Administration. That accelerated home-price
declines in high-end markets throughout California and the
Northeast, where many pricey homes couldn't be bought with a
government-backed loan.

To stem the fallout in prices, Congress raised the loan caps to
as high as $729,750 in markets such as Los Angeles and New York.
It then passed a series of one-year extensions to keep the higher
limits in place. But this year, Congress and the Obama
administration opted against an extension. As a result, the
limits in hundreds of counties fell by 10% or more on Oct. 1. For
loans backed by Fannie and Freddie, the limits declined to
between $417,000 and $625,500 in about 200 counties. More
worrisome to real-estate agents are declines in the FHA limits,
which fell to between $271,050 and $625,500 in 600 counties.
Those changes are causing heartburn because the FHA allows buyers
to make down payments of just 3.5%, and it has financed as many
as half of all home purchases in recent quarters.

Policy makers allowed the limits to fall because they want
private companies to hold more mortgage risk, and dialing down
loan limits is one way to carve out space for those investors.
Fannie, Freddie, and the FHA currently back nine in 10 new
mortgages. Taxpayers already are on the hook for $141 billion in
losses at Fannie and Freddie, and the FHA's reserves have plunged
to razor-thin levels. Mortgages that don't qualify for
government backing typically have higher borrowing costs,
including interest rates around 0.75 percentage point above
conforming loans. Mortgage rates currently are very low, but
jumbo loans also require bigger down payments—at least
20%—and can have tougher qualification rules. "The net-net
here is that the available pool of credit for housing is
shrinking. Prices will have to decline," said Christopher Whalen,
co-founder of risk-management consultant Institutional Risk

On one side of the debate are mortgage investors who say the
government needs to give the private sector more room to compete
if a vibrant market for nongovernment-backed loans is to
re-emerge. "The banking industry, flush with excess deposits,
will fund those loans," said Mike McMahon of Redwood Trust, a
real-estate investment firm in Mill Valley, Calif. Assuming a
20% down payment, the new limits still allow homeowners in parts
of California to qualify for a government-backed mortgage on a
$780,000 home. Critics say there's little public policy rationale
to subsidize loans for those borrowers, who need substantial
incomes. On the other side are real-estate agents and some
economists who say sellers are in for a nasty surprise when they
find that fewer potential buyers qualify to purchase their
properties. They say the changes also could hamstring "trade-up"
buyers who typically used home equity, which has plunged during
the bust, as their down payment to move to a bigger residence.
The loan limits wouldn't appear to have much of an impact on the
overall housing market. In 2009, about 1.5% of home-purchase
loans backed by government entities wouldn't have been eligible
under the new limits, according to a study by the Furman Center
for Real Estate and Urban Policy at New York University. But the
same study emphasized the outsize local impact. Some 9% of
purchases would have been affected in San Jose, Calif., and 5% in
San Diego.

Meanwhile, banks would have to increase the number of jumbo loan
originations by 56% to make up the gap, "which the private sector
could be hard pressed to fill," said Mark Willis, one of the
study's authors. "If you want to get the market moving, why would
you decrease the availability of credit for any part of it?"
Ultimately, the loan-limit issue shows the broader challenge in
bringing back private capital and reducing taxpayer exposure:
Housing markets are shaky, and the government is still offering
better terms than private lenders. Steps that raise borrowing
costs could attract private investors, but if that pushes home
prices down in the process, it may do more harm to the economy
and to individual housing markets still reeling from the real
estate bust.

"Systemic risk" in Europe?

European Central Bank President Jean-Claude Trichet warned of
threats to the financial system as the conflict among political
leaders intensified over how to extricate Europe from the debt
crisis. “The crisis has reached a systemic dimension,”
Trichet told European lawmakers in Brussels today. “Sovereign
stress has moved from smaller economies to some of the larger
countries. The crisis is systemic and must be tackled
decisively.” European officials are toiling to meet an
end-of-month deadline set by French President Nicolas Sarkozy to
get to grips with the crisis, which has propelled Greece to the
brink of default, shaken world markets and fueled speculation
that the 17-nation currency might not survive in its current
form. Trichet’s message coincides with a shift in the focus of
Europe’s crisis response today to Slovakia, where the
government may struggle to achieve a majority of lawmakers needed
to ratify the euro region’s retooled bailout fund. The country
is the only member of the 17-nation euro area that hasn’t
ratified the measure agreed between leaders on July 21 to fight
turmoil that has spread from Greece to larger nations including
Italy. In many ways, what happens in Europe impacts what happens
in the US.

Americans expect further house declines

Americans believe home prices will drop another 1.1% over the
next year while mortgage rates maintain record low levels, Fannie
Mae said in its September national housing survey. Fannie Chief
Economist Doug Duncan said the September survey showed a marked
deterioration in consumer expectations for home prices, making it
the weakest month on record over the last 18 months. "Despite a
decline in negative economic headlines during September — in
contrast to their ubiquity during the debt ceiling debate in
August — consumers continue to demonstrate very negative
attitudes," Duncan said. "At the same time, the share of
consumers expecting mortgage rates to go up dropped sharply to
the lowest level we have recorded, likely influenced by the news
that the Federal Reserve will attempt to keep interest rates low
for years to come. All these factors together do not bode well
for the housing market." In fact, pessimism abounds in the
housing market, with one-third of respondents expecting mortgage
rates to go up in the next year. And for the fourth consecutive
month, most Americans taking the Fannie survey said they expect
home prices to decline from year-ago levels. About 68% of those
surveyed said it's a good time to buy a home, while only 10%
believe it's a good time to sell a house.

See you at the top!
Chris McLaughlin


Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit

* Owner of one of Florida's largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris' 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

NAR - existing home sales rise

Existing-home sales improved in October while the number of homes
on the market continued to decline, according to the National
Association of Realtors (NAR). Total existing-home sales, which
are completed transactions that include single-family, townhomes,
condominiums and co-ops, rose 1.4% to a seasonally adjusted
annual rate of 4.97 million in October from a downwardly revised
4.90 million in September, and are 13.5% above the 4.38 million
unit level in October 2010. An ongoing positive trend is a
steady decline in the number of homes on the market. Total
housing inventory at the end of October fell 2.2% to 3.33 million
existing homes available for sale, which represents an 8.0-month
supply at the current sales pace, down from an 8.3-month supply
in September. Inventories have been trending gradually down since
setting a record of 4.58 million in July 2008. The national
median existing-home price for all housing types was $162,500 in
October, which is 4.7% below October 2010. Distressed homes –
foreclosures and short sales typically sold at deep discounts –
slipped to 28% of sales in October from 30% in September (17%
were foreclosures and 11% were short sales); they were 34% in
October 2010.

All-cash sales accounted for 29% of purchases in October, little
changed from 30% in September and 29% in October 2010; investors
make up the bulk of cash transactions. Investors purchased 18%
of homes in October, compared with 19% in September and 19% in
October 2010. First-time buyers accounted for 34% of transactions
in October, up from 32% in September; they were 32% in October
2010. Single-family home sales increased 1.6% to a seasonally
adjusted annual rate of 4.38 million in October from 4.31 million
in September, and are 13.8% higher than the 3.85 million-unit
pace one year ago. The median existing single-family home price
was $161,600 in October, which is 5.8% below October 2010.
Existing condominium and co-op sales were unchanged at a
seasonally adjusted annual rate of 590,000 in October but are
10.5% above the 534,000-unit level in October 2010. The median
existing condo price5 was $160,300 in October, down 1.5% from a
year ago.

Regionally, existing-home sales in the Northeast fell 5.1% to an
annual level of 750,000 in October but are 1.4% above October
2010. The median price in the Northeast was $224,400, down 5.5%
from a year ago. Existing-home sales in the Midwest rose 2.8% in
October to a pace of 1.10 million and are 19.6% higher than
October 2010. The median price in the Midwest was $132,800, which
is 4.7% below a year ago. In the South, existing-home sales
increased 2.1% to an annual level of 1.94 million in October and
are 14.1% above a year ago. The median price in the South was
$145,700, down 1.6% from October 2010. Existing-home sales in
the West rose 4.4% to an annual pace of 1.19 million in October
and are 15.5% higher than October 2010. The median price in the
West was $207,500, which is 1.6% below a year ago.

Debt committee calls it quits

To no one's surprise, the bipartisan panel called it quits on
Monday without reaching any agreement on debt reduction, let
alone the $4 trillion "grand bargain" that budget experts say is
needed at a minimum to get a handle on the country's long-term
fiscal problems. In order to stave off an automatic "sequester"
of spending cuts, the committee at least needed to come up with a
$1.2 trillion deal. But apparently even that was too much to ask.
"Despite our inability to bridge the committee's significant
differences, we end this process united in our belief that the
nation's fiscal crisis must be addressed and that we cannot leave
it for the next generation to solve," Sen. Patty Murray and Rep.
Jeb Hensarling, co-chairs of the super committee, said in a

Steven J. Baum P.C. law firm closes

The Steven J. Baum P.C. law firm, which has offices in Amherst,
N.Y., and Westbury, N.Y., has filed papers with government
agencies notifying them that it plans to close. It made the
filings under a federal law requiring employers to provide notice
before mass layoffs. “Disrupting the livelihoods of so many
dedicated and hardworking people is extremely painful, but the
loss of so much business left us no choice but to file these
notices,” said Mr. Baum in a statement issued yesterday. A firm
spokesman said it would have no further comment beyond the
release. The firm is one of numerous law firms across the
country that represent banks and services in trying to foreclose
on the millions of homeowners who have defaulted on their loans.
Some of these firms’ aggressive, and, in some cases,
duplicitous practices, have earned them the moniker
“foreclosure mills.” The Baum firm’s tactics, which
included the “robo-signing” of documents, has been among the
most criticized. Last year, a state court judge in Brooklyn
called one foreclosure filing from the Baum firm “incredible,
outrageous, ludicrous and disingenuous.”

Last month, the firm struck a settlement with the United States
attorney’s office in Manhattan, which had been investigating
the Baum firm and whether, on behalf of its lender clients, it
filed misleading legal papers to expedite foreclosures. The firm
agreed to pay a $2 million penalty and vowed change its practices
to resolve the case. But despite its settlement with the federal
government, the firm’s fortunes worsened this month after The
New York Times published photos of a Halloween party at the Baum
firm showing employees wearing costumes mocking people who had
lost their homes. After those photos surfaced, the mortgage
giants Freddie Mac and Fannie Mae cut off the Baum firm,
forbidding servicers of their mortgages from using Mr. Baum and
his colleagues. That effectively served as the firm’s death

US credit rating is under the microscope again

The sovereign credit rating of the United States is under review
by Fitch Ratings after a Congressional super committee failed to
reach agreement on reducing the nation's budget deficit. But
Standard & Poor's said the super committee's lack of accord will
not affect its rating on US debt, which it had already downgraded
in August. The super committee called it quits yesterday without
reaching any agreement on debt reduction. In order to stave off
automatic spending cuts, the committee had to come up with a deal
to cut $1.2 trillion by Nov. 23. The end of the talks
"underscores the challenge of securing the political consensus on
how to reduce the federal budget deficit and place US public
finances on a sustainable path over the medium term," said Fitch
on Monday. S&P lowered the US rating to AA-plus from the perfect
AAA in August, and said the outlook was negative. While not
changing that rating in the wake of the super committee's
failure, the agency said there was reason for caution. "We
expect the caps on discretionary spending as laid out in the
Budget Control Act of 2011 to remain in force," said S&P. "If
these limits are eased, downward pressure on the ratings could

WSJ - housing nearing bottom?

For the first time in a long time, housing figures are coming in
better than expected. The National Association of Home Builders'
sentiment index jumped three points this month to 20, its highest
reading in over a year. Last week, the Commerce Department said
building permits and construction of single-family homes rose in
October. The Federal Reserve's fourth-quarter loan survey showed
a pickup in demand for mortgage loans. Mission accomplished? Not
quite. Construction is picking up but remains at historically
depressed levels, and broader sales activity is still anemic.
Indeed, the National Association of Realtors' existing-home sales
report, out Monday, is likely to show a second straight monthly
decline in October to a seasonally adjusted annualized pace of
about 4.8 million units. That would mean the sales rate has
dropped by more than 10% so far this year. Meanwhile, the
foreclosure supply is ticking back up. After declining for three
straight quarters, the percentage of loans on which foreclosure
action has started rose in the third quarter, the Mortgage
Bankers Association's latest survey showed. This was partly due
to remediation programs and the sunset of earlier foreclosure
halts, the group said. The continued trickle of distressed
properties is likely to keep downward pressure on home prices.

Not all foreclosures are created equal, however, and regional
disparities are becoming more pronounced. In states with
nonjudicial foreclosures, like California, properties are seized
and resold more quickly than in judicial states like Florida,
where court hearings can delay this for months, if not years.
California's market, having fallen hard and fast early on, is now
starting to recover. Florida, which also fell sharply, remains
among the weakest. Bank of America Merrill Lynch economists
expect the foreclosure process to speed up in nonjudicial states
next year, with liquidations peaking in 2013. This is partly why
they expect home prices to drop another 8% on average nationwide
over the next 18 months before bottoming. This assumes a healthy
pickup in sales; if customers shy away because of economic angst
or tighter lending criteria, a rebound will take longer to
materialize. Still, six years after existing-home sales peaked,
the market is at least edging toward a bottom. The biblical
notion that seven years of famine follows seven years of feast
may have something to it.

BOA warned to get stronger

US regulators have informed Bank of America's (BOA) board that
the company could face public enforcement action if they are not
satisfied with recent steps taken to strengthen the bank, the
Wall Street Journal said, citing people familiar with the
situation. BOA has been operating under a memorandum of
understanding since May 2009. The memorandum, which is not
public, identified governance, risk and liquidity management as
problems that had to be fixed, the paper said, citing people
familiar with the document. In recent months, regulators met
with BOA 's board and said they wanted to see more progress on
the bank's compliance with the memorandum, the Journal said. In
the absence of progress, the informal order could turn into a
formal and public action, which would likely mean intensified
scrutiny and greater restrictions, the paper said. However, the
newspaper said that BOA 's directors believe the bank has met
demands set out in the 2009 document. Now, "the board's view is
it's time to take us out of the penalty box," one person familiar
with the situation told the Journal. Bank of America spokesman
Larry Di Rita declined to comment on the Journal report to

Olick - home sales split by price

"Sales of existing homes in October beat expectations,
registering a gain of 1.4% from the previous month, but that
number masks a market that is heavily weighted to the low end.
Realtors say they expect sales to bounce around the same levels
for the rest of the year, with a very slight annual gain from
2010. This sales stabilization of sorts would suggest that home
prices might soon do the same, especially as inventories come
down, but that has not been the case. Home prices continue to
drop, especially for single family homes, which saw a hefty 5.8%
price drop in October from a year ago (always measure prices
year-over-year due to their heavy seasonality). The reason is
that only one price segment of the market is really selling, and
that segment includes the most distressed, discounted homes. 'We
are getting a bifurcated recovery, the lower end seeing strong
activity, while the upper end still sagging and showing very
little interest,' said the Realtors' chief economist Lawrence

Home sales in the $0-100,000 range were up a hefty 24% from a
year ago, part of that due to last year's depressed numbers
following the expiration of the home buyer tax credit, but much
of it due to the fact that one third of the market is now
foreclosures and short sales, and that's generally the range for
those properties. Sales were also up 13% in the $100-250,000
range, but after that the party quiets down considerably. Sales
were up just over one% in the $250-500,000 range, and down 9%
above that. Obviously it's important to clear out the distressed
properties in order to return to a healthy housing market, and
that appears to be happening, slowly but surely, but the move-up
market is still in trouble. The share of higher-priced homes is
smaller, but in September it was still showing healthy gains.
Sales were up 11.5% in September in the $750-1m range. What

Loan limits for Fannie Mae and Freddie Mac dropped October first,
and that may have affected some of those higher end sales, but
uncertainty in the economy and the jobs market is also weighing
more heavily on higher-end buyers whose confidence is influenced
to a greater degree by fluctuations in the stock market and
overseas debt crises. October also saw a huge jump in the
percentage of Realtors experiencing at least one cancelled
contract. 33%! That's up from 18% in September and a norm of
around 6-8%. The Realtors blame the spike in cancellations on
declined mortgage applications, lower-than-anticipated
appraisals, employment losses and a disruption in the national
flood insurance program. They didn't mention the elephant at the
closing table, which is historically weak consumer confidence and
a continuing imbalance in supply and demand."
Economic growth revised down

Economic growth was not as strong as initially thought in the
third quarter, as corporate profits lost some of their upward
momentum. Gross domestic product, the broadest measure of the
nation's economic output, grew at a 2.0% annual rate in the
quarter. That's down from 2.5% growth originally reported by the
Commerce Department, and marks a pick-up in growth from the
second quarter, when the economy grew at a mere 1.3% rate. The
government typically revises its GDP estimates twice, and today's
report is the first revision to the third quarter figure.
Corporate profits were up 7.9% year-over-year in the third
quarter -- a slowdown from an 8.5% rise in the 12 months ending
in the second quarter. A pick-up in consumer spending was a
major driver of economic growth, but was revised slightly lower
to a 2.3% rate in the third quarter. That's still much stronger
though than sluggish 0.7% growth in the prior quarter. Business
spending also boosted growth, albeit not as much as originally
thought. Investment in equipment and software grew at a 15.6%
annual rate, down from a 17.4% rate originally reported. - mortgage-related jobs on the rise

The third quarter of 2011 saw a net increase of 2,738
mortgage-related jobs, according to recent industry data. This
increase is the first recorded in five quarters. The recent
increase in refinances – encouraged by remarkably low interest
rates – sparked a demand for loan originators and processors,
while continuing high levels of delinquencies and foreclosures
bolstered the need for servicing staff. The third quarter saw
2,502 layoffs countered by 5,240 hirings, according to the
Third-Quarter 2011 Mortgage Employment Index released by The 2,738 gain compares to a net loss of 464
jobs in the previous quarter and a loss of 936 jobs a year ago.
JPMorgan Chase was a major source of the rise in hirings in the
third quarter with 3,314 hirings of its own. MetLife added 351
jobs, and CashCall Mortgage added 230. Wells Fargo (-686),
CoreLogic (-600), and Bank of America (-364) all lost jobs during
the quarter. California-based CoreLogic anticipates about 1,000
layoffs during the second half of 2011, according to With an increase of 699 mortgage-related
jobs, Texas posted the largest increase, and according to the
index, “[t]he Dallas area has become a Mecca for mortgage
servicers.” Iowa, on the other hand, saw a decrease of 159
positions, largely due to Wells Fargo’s downsizing. So far,
the fourth quarter is seeing more hirings than layoffs.

See you at the top!
Chris McLaughlin


Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit

* Owner of one of Florida's largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris' 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

Building starts down

Builders broke ground on a seasonally adjusted annual rate of
628,000 homes last month, the Commerce Department said Thursday.
That's roughly half the 1.2 million that economists equate with a
healthy housing market. But building permits, a gauge of future
construction, rose nearly 11 percent. The increase was spurred by
a 30 percent increase in apartment permits, which reached its
highest level in three years. Over the past year, apartment
permits have surged roughly 63 percent. Single-family permits
have increased just 6.6 percent in that span. Jennifer Lee,
senior economist at BMO Capital Markets, said the housing
industry continues to be the U.S. economy's "weak link." But the
October report wasn't as bad as many analysts had expected.
Single-family homes, which make up about 70 percent of
residential home construction, rose nearly 4 percent last month.
Apartments, a more volatile category, fell more than 13 percent.
Overall, homebuilding dipped in 2009 to just 554,000 homes, the
lowest levels in 50 years in 2009. Last year the figure rose to
roughly 587,000 homes and this year may not be much better.

Though new homes represent just 20 percent of the overall home
market, they have an outsized impact on the economy. Each home
built creates an average of three jobs for a year and generates
about $90,000 in taxes, according to the National Association of
Home Builders. After previous recessions, housing accounted for
at least 15 percent of economic growth in the United States.
Since the recession officially ended in June 2009, it has
contributed just 4 percent. Sales of new homes rose in September
after four straight monthly declines, largely because builders
cut their prices in the face of weak demand. Sales hit a
six-month low in August and this year is shaping up to be the
worst since the government began keeping records a half-century
ago. Another reason sales have fallen is that previously
occupied homes are a better deal than new homes. The median price
of a new home is about 30 percent higher than the median price
for a re-sale. That's almost twice the markup in a healthy
housing market. The homebuilders' trade group said Wednesday
that its survey of industry sentiment rose this month to 20, the
highest level since May 2010. Still, any reading below 50
indicates negative sentiment about the housing market. The index
hasn't reached 50 since April 2006, the peak of the housing

Jobless claims drop

Weekly applications dropped by 5,000 to a seasonally adjusted
388,000, the Labor Department said Thursday. It was the fourth
decline in five weeks. The four-week average, a less volatile
measure, dropped to 396,750. That's the first time the average
been below 400,000 in seven months. Applications need to
consistently drop below 375,000 to signal sustained job gains.
They haven't been that low since February. The number of people
receiving benefits also fell to the lowest level since Sept.
2008, when Lehman Brothers collapsed and the financial crisis
intensified. Some people may no longer be getting benefits
because they've found jobs. But a larger number have likely used
up all their benefits, Wood said. The benefit rolls fell 57,000
to 3.6 million in the week ended Nov. 5. That's one week behind
the applications data. The figure is the lowest since Sept. 20,
2008. That doesn't include about 3 million additional people
receiving extended benefits from emergency programs put in place
during the recession. All told, 6.8 million people received
benefits during the week ended Oct. 29, the latest data

10 states where foreclosures have dropped prices

U.S. foreclosures rose 7% in October from the previous month, and
frequently these foreclosures result in sales that depress home
prices. A new report for RealtyTrac points out 10 states with
highest foreclosure savings in October.

- Oklahoma
Foreclosure savings: 60%
Average foreclosure sales price: $58,218
1 in every 801 housing units received a foreclosure filing in
October 2011

- Kentucky
Foreclosure savings: 52%
Average foreclosure sales price: $84,170
1 in every 2,028 housing units received a foreclosure filing in
October 2011

- Texas
Foreclosure savings: 46%
Average foreclosure sales price: $104,602
1 in every 988 housing units received a foreclosure filing in
October 2011

- Michigan
Foreclosure savings: 43%
Average foreclosure sales price: $78,290
1 in every 282 housing units received a foreclosure filing in
October 2011

- Delaware
Foreclosure savings: 42%
Average foreclosure sales price: $143,925
1 in every 498 housing units received a foreclosure filing in
October 2011

- Pennsylvania
Foreclosure savings: 41%
Average foreclosure sales price: $104,780
1 in every 1,525 housing units received a foreclosure filing in
October 2011

- Louisiana
Foreclosure savings: 39%
Average foreclosure sales price: $97,007
1 in every 1,213 housing units received a foreclosure filing in
October 2011

- Illinois
Foreclosure savings: 39%
Average foreclosure sales price: $124,755
1 in every 423 housing units received a foreclosure filing in
October 2011

- Georgia
Foreclosure savings: 37%
Average foreclosure sales price: $118,535
1 in every 406 housing units received a foreclosure filing in
October 2011

- Maryland
Foreclosure savings: 36%
Average foreclosure sales price: $150,053
1 in every 1,954 housing units received a foreclosure filing in
October 2011

Solyndra back in the news

Taking responsibility for a debacle that has embarrassed the
Obama administration, Energy Secretary Steven Chu says he made
the final decisions on a half-billion-dollar loan to a California
solar company that later went bankrupt. Chu, in testimony
prepared for delivery Thursday to a House committee, said he made
all decisions on Solyndra Inc. with the best interests of the
taxpayer in mind. In a joint statement, Reps. Fred Upton of
Michigan and Cliff Stearns of Florida said they intend to find
out how decisions were made to guarantee and lend more than $500
million to Solyndra. Upton chairs the energy panel while Stearns
heads a subcommittee on investigations. "We want to find out why
the administration restructured the loan after Solyndra had
reached a technical default, and how they explain putting private
investors in line ahead of taxpayers. And we need to understand
how all the warnings, from inside and outside the Department of
Energy, were ignored and this risky bet was allowed to happen,"
Stearns and Upton said. Solyndra was the first renewable-energy
company to receive a loan guarantee under the 2009 stimulus law,
and the Obama administration frequently touted the company as a
model for its clean energy program. Chu attended a 2009
groundbreaking when the loan was announced, and President Barack
Obama visited the company's Fremont, Calif., headquarters last
year. Since then, the company's implosion and revelations that
the administration hurried a review of the loan in time for the
September 2009 groundbreaking has become an embarrassment for Chu
and Obama and a rallying cry for GOP critics of the
administration's green energy program.

Olick - housing causes stagnation

"Just over 11 million Americans moved between March of 2010 and
March of 2011, according to a new report from the U.S. Census.
That might sound like a lot, but it's actually a record low, down
from 12 and a half million who moved the previous year. The
record high was 46 million movers in 1984-85, and you have to
factor in that the population has grown immensely since then.
The housing crash has left Americans stagnant, but even worse, it
has left homeowners trapped. The decline in the mobility rate of
those who already own homes was even more dramatic. Just 4.7
percent of homeowners moved in the past year, down from 5.2
percent the previous year, according to the Census. That
translates into 9.7 million homeowners, again a record low.

The immobility of current homeowners is a huge drag on the
economy; when you move, you spend money not just on the new
house, but on renovations, moving trucks, travel expenses,
possible temporary housing, even food when you restock the new
refrigerator. There are initial payments, like setting up the new
cable, installing the wifi, putting in an alarm system,
registering your car in another state. Endless sectors of the
economy, and even local government, benefit from American
mobility, most of all being the job market itself. Last week I
heard a statistic that a few thousand jobs stood open in the
month of October, unable to be filled. Much of that has to do
with the skill set of the nation's workforce, but much also has
to do with this lack of mobility. Homeowners either can't sell
their homes or don't want to, both due to the drop in home
prices. One of the nation's greatest historical assets has been
its mobility, from new settlers going West to an enviably modern,
flexible work force. Unless we can move, our economy is going
nowhere fast."

Consumer prices fall

The Labor Department said consumer prices dropped 0.1 percent
last month as Americans paid less for new cars and gasoline. The
data reinforces the view that inflation is poised to trend lower
following a spike in oil prices earlier in the year. That is seen
giving the Fed more room to act if the economy slows. "The Fed
remains intently focused on employment and growth -- and not on
inflation," said Jacob Oubina, an economist at RBC Capital
Markets in New York. The drop in prices during October gave a
boost to workers whose wages failed to keep up with inflation
over the summer, which had led households to save less. A
separate report by the Labor Department showed weekly earnings
rose 0.3 percent in October when accounting for inflation.
Stronger incomes could help consumer spending as the year closes,
giving the economy a little more momentum as the country braces
for a possible recession in Europe that would drag on growth.

Luxury Greenwich short sales

If one person's misfortune is another's gain, then there may be a
lot of fortunes to be made in the real estate market in tony
Greenwich, Conn. Home to wealthy individuals in New York City's
finance sector, various properties in the surrounding area may be
taking a hit related to hard times in the banking industry or
other sectors. Goldman Sachs, for example, reported its second
loss ever in the third quarter. In October, 32 percent of
current for-sale listings on Zillow in Greenwich were reduced.
The median price cut was 7.44 percent. However, home values in
Greenwich are up 2.1 percent year-over-year to a Zillow Home
Value Index (ZHVI), or median home value, of $1,134,100,
according to Zillow's third quarter Real Estate Market Reports
released last week. Nationally, home values fell 4.4 percent
year-over-year to a median value of $171,500. The ZHVI measures
the value of all homes, not just those that sold in a particular
period. Svenja Gudell, senior economist with Zillow, said
Greenwich is "faring a lot better" than the national medium.
"Greenwich is an affluent area with high-priced homes.

The high-end homes tend to fare better than low-end homes in
terms of home value," she said. In the larger Stamford metro,
where Greenwich is located, 19.9 percent of all single-family
homes with mortgages were underwater in the third quarter.
Nationally, the negative equity rate is 28.6 percent. By
comparison, home values in Manhattan are up 12.0 percent
year-over-year to a median home value of $913,800, according to
Zillow. In October, 17.6 percent of current for-sale listings on
Zillow in Manhattan were reduced. The median price cut was 5.81

WSJ - how many homes are in trouble?

Call it what you will—the “shadow inventory,” the
“distressed inventory,” the “foreclosure pipeline”—but
if you ask five researchers how many houses or mortgages we
should worry about, you’ll probably get at least five
completely different answers. Given this, Developments examined
these worrisome numbers and see how they stack up. Here’s a
roundup of distress numbers, and how researchers arrived at

LPS Applied Analytics

Number: 4 million loans

Explanation: This is the number of loans that have either been
delinquent for 90 days or more or are in foreclosure. The latest
report showed that the number of new loans entering delinquency
was slowing, but the number of homes in foreclosure that have not
been sold remains fairly flat, mainly because the foreclosure
process has been bogged down by legal issues in many states. LPS
doesn’t use the term “shadow inventory.”

Amherst Securities

Number: 8.2 million and 10.3 million loans

Explanation: Laurie Goodman, a trusted authority on housing
finance issues and managing director at bond-trader Amherst,
recently presented this whopping estimate of loans “that may be
subject to distressed sales over time.” Amherst divides the
nation’s 55 million mortgages into five categories:
non-performing loans; loans that were once delinquent but are now
performing and likely to re-default; performing loans that are
underwater by more than 20%; performing loans that are underwater
by less than 20%; and performing loans with some equity in them.
Amherst considers loans that are 60 days delinquent to be
troubled – most other estimates start the clock on their
definition of distress at 90 days.

Barclays Capital

Number: About 3 million loans

Explanation: Barclays Capital’s Chief Housing Economist Michael
Gapen produced a report looking at loans delinquent for 90 days
or more, foreclosures, and REO, or bank-repossessed properties.
His report does not include 30-day or 60-day delinquencies. “If
you included those categories…it would be a much larger
number,” a spokesman for the bank says.


Number: 1.6 million homes

Explanation: Sam Khater, an economist with CoreLogic, said that
CoreLogic’s shadow estimate is so low because the company uses
“roll-rate analysis” to predict how many of the 90-plus-day
delinquent loans out there will “roll over” to REO, meaning,
how many of the country’s seriously delinquent loans will be
repossessed by the bank. Then, the company estimates how many
loans, once the house is repossessed by the banks, will end up
listed on public multiple-listing services (making them no longer
“shadow” inventory), and removes those.

Capital Economics

Number: 4.3 million homes

Explanation: Capital Economics has estimated the number of homes
“waiting in the wings [that] will eventually add to the supply
of properties for sale” and “prevent a normalization in the
visible inventory for several years yet.” Their number is
comfortably middle-of-the-road. Their definition does not include
REO inventory, and it admits that in the worst-case scenario,
there could be a shadow inventory of 15.3 million, using the
widest possible definition of the term.

There are a few other helpful numbers out there. RealtyTrac, for
example, estimates the total number of foreclosure filings
nationwide, and the Mortgage Bankers Association estimates the
percentage of loans that are delinquent, divided into 30, 60 and
90 day delinquencies, but neither service opines on the total
number of shadow inventory. The National Association of Realtors
has used LPS and MBA data to make estimates on the size of the
shadow inventory, but not consistently.

Deficit panel deadlock threatens economy

In an echo from early August, a gridlocked bipartisan
Congressional committee must find a way to agree on a deficit
reduction plan by Nov. 23rd. Congress itself must then pass the
bill, without changes, by Dec. 23rd. If it doesn't, $1.2
trillion in spending cuts will automatically take effect
beginning in 2013. Analysts worry that the looming cutbacks,
which are scheduled at time when the economy is expanding at an
annual rate of just 2.5 percent, could knock the U.S. back into
another recession. That's because the cutbacks wouldn't be the
only drag on the economy. If Congress isn't able to agree on the
deficit framework, there's little hope they will extend stimulus
measures like unemployment benefits, a payroll tax cut and
Bush-era income tax cuts that have helped bolster consumer
spending, said David Kelly, chief market strategist at JP Morgan
Funds. That combination may halt the economy in its tracks,
leading to more layoffs and weaker business confidence right when
the unemployment rate is still stuck at 9 percent. "Everyone's
attention has been focused on Europe lately, but this is a real
issue that's being ignored," Kelly said.

Despite its 2.5 percent growth rate last quarter, the economy
remains fragile. The Federal Reserve recently lowered its
economic outlook for 2012. The central bank predicted that the
economy will grow at a rate of about 2.7 percent next year. That
is a full percentage point below a forecast from June, and below
the 3 to 5 percent annual growth rate that is considered healthy.
Economists at JP Morgan have a far gloomier forecast: 1.7
percent. Few investors have much faith that Washington will pass
the next deficit-cutting bill in time. Congress was barely able
to reach an agreement to raise the government's debt ceiling
ahead of the Aug. 2 deadline. The possibility that the U.S.
government could default on its debt and a subsequent downgrade
by Standard and Poor's that cut the nation's credit rating for
the first time sent financial markets in a tailspin.

NAR - US to remain a nation of home-owners

The U.S. will not become a nation of renters; there are just too
many benefits, both financial and otherwise, to own versus rent.
That’s according to the combined findings of several recent
studies presented during the “Buyer or Renter Nation?”
session at the 2011 Realtors Conference & Expo. An analysis over
a 31-year period across 23 metropolitan areas compared the
ownership benefits in terms of appreciation and interest
deductibility and the costs homeowners incur with down payment,
taxes, insurance and maintenance. When it was assumed that
renters reinvested any savings in rent (versus a higher monthly
mortgage payment), maintenance and down payment, renters had a
greater portfolio than buyers in 91 percent of the areas
examined. However, when the model allowed renters to spend any
savings rather than reinvest those savings, 84 percent of buyers
came out ahead. “We knew that homeowners, on average,
accumulate more wealth than renters,” said Ken Johnson, editor,
Journal of Housing Research at Florida International University.
Johnson spoke at the session and conducted the analysis with Eli
Beracha. “These findings indicate that homeownership is a
self-imposed savings plan. Not everyone should own a home, but
from a financial perspective, people who are planning to stay in
a property over the long term can benefit from buying. According
to the most recent data from the Federal Reserve Board, a
homeowner’s net worth is 45.9 times that of a renter’s.
Another analysis conducted by Johnson, Beracha, Hilla Skiba and
Mark Hirschey determined that housing affordability is at record
levels. Twenty-three states are at 30-year record levels of
affordability based on price-to-income ratios, and all 50 states
are at 30-year record affordability levels based on mortgage
payment-to-income ratios. “Homeownership is more affordable
today than at anytime over the last 30 years,” said Johnson.

Beyond the financial advantages of homeownership, Johnson also
cited several studies that have demonstrated how homeownership
enhances civic pride, improves voter turnout, increases personal
happiness, reduces crime, and provides a better familial
environment. “These findings are no surprise to Realtors,”
said National Association of Realtors (NAR) President Ron Phipps,
broker-president of Phipps Realty in Warwick, R.I. “We, like
the nation’s 75 million homeowners and many other who aspire to
one day own a home, know homeownership is an investment in the
future of our families, communities, and nation. That is why we
will continue to fight for public policies that promote
responsible, sustainable homeownership; we believe that anyone
who is able and willing to assume the responsibilities of owning
a home should have the opportunity to pursue that dream.”

Banks ramping up fees

Even as Bank of America and other major lenders back away from
charging customers to use their debit cards, many banks have been
quietly imposing other new fees. Need to replace a lost debit
card? Bank of America now charges $5 — or $20 for rush
delivery. Deposit money with a mobile phone? At U.S. Bancorp, it
is now 50 cents a check. Want cash wired to your account?
Starting in December, that will cost $15 for each incoming
domestic payment at TD Bank. Facing a reaction from an angry
public and heightened scrutiny from regulators, banks are turning
to all sorts of fees that fly under the radar. Everything, it
seems, has a price. “Banks tried the in-your-face fee with
debit cards, and consumers said enough,” said Alex Matjanec, a
co-founder of “What most people don’t
realize is that they have been adding new charges or taking fees
that have always existed and increased them, or are making them
harder to avoid.” Banks can still earn a profit on most
checking accounts. But they are under intense pressure to make up
an estimated $12 billion a year of income that vanished with the
passage of rules curbing lucrative overdraft charges and lowering
debit card swipe fees. In addition, with lending at anemic levels
and interest rates close to zero, banks are struggling to find
attractive places to lend or invest all the deposits they hold.
That poses another $8 billion drag. Put another way, banks would
need to recoup, on average, between $15 and $20 a month from each
depositor just to earn what they did in the past, according to an
analysis of the interest rate and regulatory changes on checking
accounts by Oliver Wyman, a financial consulting firm.

NAR - commercial real estate to improve

Depressed conditions in the financial and small business sectors
continue to negatively affect the commercial real estate industry
and the nation’s economic recovery. That’s according to
economists at the Economic Issues and Commercial Real Estate
Business Trends Forum at the 2011 Realtors Conference & Expo
yesterday. During the forum, National Association of Realtors
(NAR) Chief Economist Lawrence Yun shared his predictions for the
commercial real estate market in 2012 and 2013, anticipating a
steady improvement in commercial real estate markets. According
to Yun, the U.S. economy remains sluggish and continues to
perform well below the desired pace of economic expansion. Still,
he said at the current rate of growth, about 3 to 4 million jobs
will be generated over the next 2 years. While corporate
profits have surged in the past year, Yun said that business
spending and hiring remain low. Despite record-low borrowing
conditions, he said that many businesses are also not taking out
loans. As for why businesses are not spending their profits, Yun
cited concerns about over-expanding during times of low economic
activity and uncertainty about future government policies.

Another area of concern for the U.S. economy is small businesses,
a major driver of new jobs. Yun said small businesses are not
recovering from the downturn since small businesses owners
don’t have access to startup capital since they lack large cash
reserves and often use their personal savings and housing equity
as a source of funding. “I anticipate a small recovery in the
next year in home values, which would help small business owners;
however, that’s only if legislators and regulations don’t add
obstacles to hinder the housing market recovery, such as
modifying or eliminating the mortgage interest deduction or
increasing down payment requirements,” said Yun. Yun predicted
moderate improvements in commercial real estate markets and the
broad economy because job growth and other economic factors are
slowly improving. He said that despite the stock market’s
volatility, it is performing higher than it was in 2008, making
it easier for companies to raise capital and for consumers to
gain wealth. Yun doesn’t anticipate a second economic
recession in the near term, because of the strong cash potential
that businesses could release into economy, which would help the
country avoid a second recession. He said that international
trade is expanding and that international home buyers are taking
advantage of the weaker dollar and investing in commercial and
residential real estate.

A majority of the commercial real estate sectors are still
experiencing rising absorption and little improvement in rents.
The multifamily apartment sector remains the strongest with net
absorption rates increasing and vacancies decreasing, causing
rents to rise across the country. Yun said that’s because
rising foreclosures and short sales are driving many individuals
into renting and that the lack of available credit to qualified
home buyers is keeping many in the rental market. However, high,
increasing rents combined with record-low interest rates are
enticing some individuals into the housing market. At the
session, Yun was joined by Kenneth Riggs, president and chairman
of RERC and chief real estate economist of the CCIM Institute,
and Robert White, founder and president of Real Capital
Analytics, who shared his outlook for slight improvements in
commercial real estate markets in the year ahead.

Students head for McMansions

In Merced, a city in the heart of the San Joaquin Valley and one
of the country’s hardest hit by home foreclosures, the downturn
in the real estate market has presented an unusual housing
opportunity for thousands of college students. Facing a shortage
of dorm space, they are moving into hundreds of luxurious homes
in overbuilt planned communities. The finances of subdivision
life are compelling: the university estimates yearly on-campus
room and board at $13,720 a year, compared with roughly $7,000
off-campus. Sprawl rats sharing a McMansion — with each getting
a bedroom and often a private bath — pay $200 to $350 a month
each, depending on the amenities. A confluence of factors led to
the unlikely presence of students in subdivisions, where the
collegiate promise of sleeping in on a Saturday morning may be
rudely interrupted by neighborhood children selling Girl Scout
cookies door to door.

This city of 79,000 is ranked third nationally in
metropolitan-area home foreclosures, behind Las Vegas and
Vallejo, Calif., said Daren Blomquist, a spokesman for
RealtyTrac, a company based in Irvine, Calif., that tracks
housing sales. The speculative fever that gripped the region and
drew waves of outside investors to this predominantly
agricultural area was fueled in part by the promise of the
university itself, which opened in 2005 as the first new
University of California campus in 40 years. The crash crashed
harder here. “Builders were coming into the area by the
bulkload,” said Loren M. Gonella, who owns a real estate
company here. “It was, ‘Holy moly, let’s get on this gravy
train.’ ” But visions of an instant Berkeley materializing
in the cow pastures were premature. The stylishly designed
university planned for a gradual expansion, adding 600 new
students a year. That has meant phased dorm construction, which
is financed with tax-exempt bonds repaid by student revenue.
There is room for only 1,600 students in the campus dorms, but
5,200 are enrolled. With hundreds of homes standing empty, many
of them likely foreclosures, students willing to share houses
have been “a blessing,” said Ellie Wooten, a former mayor of
Merced. Five students paying $200 a month each trump families
who cannot afford more than $800 a month.

NAR - economy and housing to improve

Although the housing market struggled to maintain an even footing
in 2011, gradual improvement is expected in 2012 and beyond,
according to projections at a residential forum here at the 2011
Realtors Conference & Expo. Lawrence Yun, chief economist of the
National Association of Realtors and the most optimistic man in
America, said home sales should be stronger. “Tight mortgage
credit conditions have been holding back home buyers all year,
and consumer confidence has been shaky recently,” he said.
“Nonetheless, there is a sizeable pent-up demand based on
population growth, employment levels and a doubling-up phenomenon
that can’t continue indefinitely. This demand could quickly
stimulate the market when conditions improve.” Yun projects
growth in Gross Domestic Product to be 1.8 percent this year,
then rising moderately at a rate of 2.2 percent in 2012. With job
growth of 1.7 to 2.2 million next year, the unemployment rate is
expected to decline to 8.7 percent by the second half of 2012.
Mortgage interest rates should gradually rise from recent record
lows and reach 4.5 percent by the middle of 2012.

Existing-home sales are forecast to edge up about 1 percent this
year, and then rise another 4 to 5 percent in 2012. Based on
NAR’s current projection model, existing-home sales would total
4.96 million in 2011. NAR presently is benchmarking
existing-home sales, and downward revisions are expected for
totals in recent years, although there will be little change to
previously reported comparisons based on percentage change. There
will be will be no change to median prices or month’s supply of
inventory. Publication of the improved measurement methodology is
expected in the near future. New-home sales are expected to be a
record low 302,000 this year, rising to 372,000 in 2012. Housing
starts are forecast to rise to 630,000 next year from 583,000 in
2011. “Although a double-digit growth in new-home sales and
housing starts sounds encouraging, the projections remain
historically soft relative to long-term underlying demand,” Yun
explained. With falling inventory, the median home price should
rise in 2012. “Home prices have yet to show a definitive
stabilization pattern in most areas. Still, given an
over-correction in prices, there likely will be moderate
appreciation in 2012,” Yun said.

MBA - multifamily lending up

In 2010, 2,548 different multifamily lenders provided a total of
$68.8 billion in mortgage financing for apartment buildings with
five or more units, according to a report from the Mortgage
Bankers Association (MBA). The 2010 dollar volume represents a
31% increase from 2009 levels. Just one% of the lenders accounted
for 51% of the dollar volume, while three-quarters of the lenders
made five or fewer loans over the course of the year. In terms
of total dollar volume, the top five multifamily lenders in 2010
were Wells Fargo Bank N.A., CBRE Capital Markets, Inc., Berkadia
Commercial Mortgage LLC, PNC Real Estate and Prudential Mortgage
Capital Company. “The multifamily lending market grew 31% in
2010, with credit extended by a broad range of lenders to a broad
range of properties,” said Jamie Woodwell, MBA’s Vice
President of Commercial Real Estate Research.

The report is based on data from the MBA 2010 Commercial
Multifamily Annual Origination Volume Rankings and the Home
Mortgage Disclosure Act (HMDA). The MBA survey targets
specialized commercial/multifamily originators and covered $119
billion in commercial and multifamily loans in 2010. The HMDA
data adds multifamily loans from banks, thrifts and other
institutions that meet certain single-family origination
thresholds. When combined, the two datasets provide the most
comprehensive assessment of the multifamily mortgage market

Jobless claims slightly down

Initial claims for state unemployment benefits slipped 6,000 to a
seasonally adjusted 403,000, the Labor Department said, from an
upwardly revised 409,000 the prior week. Economists polled by
Reuters had forecast claims falling to 400,000 from the
previously reported 404,000. The claims data covered the survey
week for the government's closely watched nonfarm payrolls count
for October. First-time applications for jobless aid fell 25,000
between the September and October survey periods, suggesting a
step-up in nonfarm employment after payrolls increased 103,000
last month.

Olick - rising rates threaten refis

"One weekly report does not a trend make, but today's mortgage
application survey should serve up a good dose of reality to all
of those state attorneys general and Obama administration
officials touting a grand new refinance program for underwater
borrowers. Rates dropped to record lows a month ago, and while
more borrowers went to refinance, the volumes were still very
low. Then, more recently, we see basically a quarter point rise,
and refinances fall off a cliff. The goal of the refinance
proposals (which I discussed in yesterday's blog) is to get the
allegedly 3/4 of underwater borrowers with above-market mortgage
rates (about 8.9 million according to CoreLogic) a break on their
monthly payments. This would supposedly lessen the threat of
default as well as add much-needed spending power back into the
economy. But with mortgage rates rising again, how much of a
bang for the buck will banks and the administration get out of
these refi programs?

Well let's look at what's pushing rates up: 'First, Europe’s
alleged debt bomb solution is pulling dollars out of Treasuries
resulting in rising Treasury rates .. and mortgage rates,' says
Dr. Anthony Sanders, Professor of Finance at George Mason
University. 'Second, FHFA [Fannie and Freddie's regulator] is
increasing Guarantee Fees for Fannie and Freddie loan
purchases/insurance which adds to the mortgage rate. Third,
mortgage rates have a risk premium component that follows the VIX
(CBOE Volatility Index on the S&P500). And under just recently,
the VIX has been rising.' That basically means that any benefit
of these so-called 'streamlined' refis by Fannie and Freddie or
by a bank/AG settlement, 'will have small impact and less
desirability for the consumer,' adds Sanders. That is if those
borrowers can actually qualify. On the other hand, Guy Cecala of
Inside Mortgage Finance, argues that the bulk of the borrowers
targeted by these refi plans have interest rates between 6 and 7%
now. 'I think the idea is that the group of borrowers the
administration/AGs are looking at haven’t been able to refi for
several years and would greatly benefit even if they 'only' got a
FRM at 5%. So relatively small changes in rates don’t impact
the overall goal.'

I realize that the weekly refinance applications numbers from the
Mortgage Bankers Association largely chart borrowers who are not
underwater on their current loans, and the refi programs target
those who are underwater. Still, rates have every reason to
climb, especially with new lower conforming loan limits and the
potential for more risk retention by lenders coming down the
pike. The resulting refis could end up offering savings of less
than $100 a month, given the likely loan sizes that will
qualify...which leads me back to my original premise: The
administration's refi proposal is more politics than substance,
and this latest AG/bank settlement proposal is just plain
baffling, because what does refinancing current borrowers have to
do with justice and restitution for borrowers whose foreclosure
paperwork was mishandled?"

Misery index highest since 1983

The misery index — which is simply the sum of the country's
inflation and unemployment rates — rose to 13.0, pushed up by
higher price data the government reported yesterday. The data
underscores the extent that Americans continue to suffer even two
years after a deep recession ended, with a weak economic recovery
imperiling President Barack Obama's hopes of winning reelection
next year. With gasoline prices high, consumers have less to
spend on other things. Moreover, a rise in overall prices saps
economic growth, which is typically measured in
inflation-adjusted terms. The last time the misery index was at
current levels was in 1983. But in 1984 an improving economy
probably helped President Ronald Reagan win reelection. This
year, the index has risen more than 2 points.

While the misery index rose in September, many economists expect
some respite in coming months, driven by softer inflation.
Wednesday's price data showed inflation outside food and energy
rose at the slowest pace in six months in September. Weakness in
the jobs markets also accounts for some factors that could push
inflation lower in coming months, economists say. "With
households facing weak wage growth and tight budgets, it is
difficult to see a sustained, broad-based increase in prices,"
said Bank of America Merrill Lynch economist Neil Dutta. He said
Wednesday's data showed that businesses' ability to raise prices
on clothing, movies and toys was "hitting a wall." Weak incomes
also will make it harder for building owners to raise rents,
further dampening inflation, Dutta said.

Indeed, inflation could slow to below 2% by mid-2012, said
Capital Economics economist Paul Ashworth. But a decline in the
misery index declines due to softer inflation might not help
Obama's reelection chances much. "Any lowering of inflation
isn't going to have much effect. People are just focused like a
laser on unemployment," said independent political analyst Stuart
Rothenberg. Analysts polled by Reuters last week saw the jobless
rate — currently stuck at 9.1% — barely ticking down to 8.9%
by the end of next year. With the election in November 2012, the
expected decline looks unlikely to help Obama's job prospects

20,000 foreclosures took 4 years to sell

More than 23,200 foreclosures in 2006 sat unsold until the second
quarter of 2010 – more than four years later, according to a
study from the data analytics firm CoreLogic. Analysts studied
the destinations of more 355,000 properties that hit foreclosure
auctions in 2006. Investors bought about one-third of them at the
courthouse steps, and the remaining 233,000 went back onto
lenders' books as real estate owned. Of those, 90%, or 210,000
homes, sold as REO to third-party buyers. Of these, half took six
months to sell and 21% took more than one year to unload. But
23,200 sat unsold for four years, CoreLogic found. These are
properties that entered the foreclosure process before the system
surpassed its maximum capacity in many states. REO sales have yet
to peak, meaning the time banks and the US government will have
to hold these homes could go even longer.

"It is well known that foreclosure and liquidation timelines have
risen dramatically over the last few years. What is less known is
how REO persistence, or REOs remaining unsold for extended
periods of time, has changed over time," CoreLogic said. What is
known is that the longer the property sits, the more cash buyers
end up with the property, often for steep discounts. For the 2006
REO that resold more the one year later, 55% went to cash
investors, compared to 40% for the entire foreclosure stock that
year. More than 11,000 of the REO sales were resold three times
over the next five years, and 70% were resold through cash
transactions. CoreLogic said the dominance of cash for these
so-called "churned" properties is consistent in later auctions.
For the 2006 REO sold to buyers who took out a mortgage, only 2%
fell back into REO in the five years since. "This indicates that
REO recidivism is not as significant a concern as previously
thought," CoreLogic said.

Such stagnant pools of inventory have crippled any recovery in
home prices. Most analysts predict even more depreciation in
2012. Billions in government initiatives such as the Neighborhood
Stabilization Program and the Hardest Hit Fund went to help
states and nonprofits resell vacant and abandoned foreclosures
even as Republicans in the House moved to cut these programs.
But until the overall economy and employment improves, the
inventory overhang will only widen. "In 2006 and 2007, 10% of
properties that entered the REO stock at the foreclosure auction
were still in REO as of mid-2010," CoreLogic said. "In other
words, these properties have been in REO continuously since

MBA - mortgage applications up

Mortgage applications increased 1.3% from one week earlier,
according to data from the Mortgage Bankers Association’s (MBA)
Weekly Mortgage Applications Survey for the week ending October
7, 2011. The Market Composite Index, a measure of mortgage loan
application volume, increased 1.3% on a seasonally adjusted basis
from one week earlier. On an unadjusted basis, the Index
increased 1.3% compared with the previous week. The Refinance
Index increased 1.3% from the previous week. The seasonally
adjusted Purchase Index increased 1.1% from one week earlier. The
unadjusted Purchase Index increased 1.2% compared with the
previous week and was 2.9% lower than the same week one year ago.
The increases were driven mainly by the government loan category,
with the Government Purchase index up 2.4% and Government
Refinance index increasing 9.9%. The Conventional Purchase and
Refinance indexes increased 0.1% and 0.2%, respectively.

The four week moving average for the seasonally adjusted Market
Index is up 1.56%. The four week moving average is down 0.51%
for the seasonally adjusted Purchase Index, while this average is
up 2.15% for the Refinance Index. The refinance share of
mortgage activity remained unchanged at 79.1% of total
applications from the previous week. The adjustable-rate mortgage
(ARM) share of activity decreased to 6.0% from 6.4% of total
applications from the previous week. The average loan size of
all loans for home purchase in the US was $210,863 in September
2011, down from $212,736 in August 2011. The average loan size
for a refinance was $237,632, down from $241,323 in August. The
largest purchase loans were made in the Pacific region at $
302,110. The largest refinance loans were also made in the
Pacific region at $ 339,592.

Pennsylvania state capital declares bankruptcy

The Harrisburg, Pa., city council passed a resolution Tuesday
night authorizing a Chapter 9 bankruptcy filing, a city official
said today. Harrisburg faces a $300 million debt crises tied to
a project to revamp its incinerator and has been plagued with
cash flow problems. Mark Schwartz, the council's attorney in
this matter, said on Wednesday that the bankruptcy filing would
give the city ''bargaining power'' with its creditors and with
the state, which is considering a takeover plan. The bankruptcy
court for the middle district of Pennsylvania confirmed on
Wednesday it had received a faxed bankruptcy petition from
Harrisburg, but that it has not been filed yet.

The state legislature is considering a bill that would call for
an eventual takeover of the city and the forced implementation of
a fiscal rescue plan. In July, the city council rejected a
state-approved rescue plan, which called on it to renegotiate
labor deals, cut jobs, and sell or lease its most valuable
assets, including the incinerator and parking garages. In
August, the council rejected a similar plan that had been crafted
by Mayor Linda Thompson, saying that both plans were overly
burdensome for Harrisburg residents and did not ask enough of the
county, bondholders, and the bond insurer, Assured Guaranty.

MBA issues housing forecast

The Mortgage Bankers Association (MBA) expects to see mortgage
originations fall from an estimated $1.2 trillion in 2011 to $900
billion in 2012. The drop will be driven by a significant decline
in refinance originations, while purchase originations will
increase only slightly. The economy will see another year of
anemic growth in 2012, and then will grow somewhat faster in
2013. Refinance originations are expected to fall despite low
mortgage rates as economic uncertainty lingers and fewer eligible
borrowers remain. Following are the key points of the latest MBA

- Real GDP growth will be 1.3% in 2011, which began with a
dismal 0.4% growth in the first quarter and 1.3% growth in the
second quarter. We expect the second half to average around 1.8%,
but even that is on shaky ground, with a weak labor market,
volatile financial markets, and looming risks of a spillover from
the European debt crisis. We expect 2012 to continue in a similar
fashion, showing growth of around 1.7%, as Europe enters a
recession of its own and the US economy flirts with a shallow
recession until midway through 2012. There should be a modest
recovery in 2013 with growth reaching 2.4% for the year.

- The unemployment rate will increase slowly until the second
quarter of 2012, hitting 9.3%, from the current level of 9.1%. It
is expected to be around 9.1% for 2011, 9.3% for 2012, and 9.1%
for 2013. Even though both economic and job growth are in
positive territory, they are still insufficient to lower the
unemployment rate in the near term.

- Fixed mortgage rates are expected to remain low by historical
standards, finishing 2011 at around a 4.5% average for the year,
falling slightly to 4.4% for 2012 and climbing back up to 4.9 by

- Total existing home sales will stay around the 4.9 million
unit pace for 2011 and 2012, before increasing slightly to 5.2
million units in 2013 as the broader economy recovers. The
recovery in the new home sales will have a comparably slow start,
and may well be slow for most of 2012, but will show some
meaningful increases in 2013.

- Home price measures that exclude distressed transactions have
stabilized, and certain markets are showing year-over-year
appreciation. FHFA's national repeat transactions home price
measure, which does not distinguish between distressed and
non-distressed sales, will continue to decline before starting a
reversal in mid to late 2012, but will vary by state and home

- Purchase originations will likely decrease in 2011 from 2010,
totaling $400 billion from an estimated $472 billion in 2010.
Seeing as 2012 will likely be another year of slow economic
growth, purchase originations will increase to slightly around
$412 billion for the year. As the economy picks up a little more
speed in 2013 and home sales and home prices also start to
increase, purchase originations are expected to increase to $770
billion for the year.

- Despite lower mortgage rates towards the end of the year,
refinance originations in 2011 will be lower than in 2010,
falling to $783 billion from an estimated $1.1 trillion, as there
were fewer eligible borrowers left to refinance. We expect this
“burnout” to continue through 2012 and 2013, even as rates
remain below 5%, with refinance originations falling steadily to
$495 billion and then $332 billion, respectively.

Oil up

Oil prices inched up above $86 a barrel Wednesday, supported by a
weaker dollar even as concerns persisted about the sovereign debt
crisis in Europe and the International Energy Agency slightly
lowered its demand growth forecasts. By early afternoon in
Europe, benchmark crude for November delivery was up 70 cents at
$86.51 a barrel in electronic trading on the New York Mercantile
Exchange. The contract rose 40 cents to settle at $85.81 in New
York on Tuesday. In London, Brent crude was up $1.23 to $111.96
a barrel on the ICE Futures exchange. The euro gained on the
dollar after the release of fresh data showing that industrial
production in the 17 countries using the common European currency
rose unexpectedly in August, easing concerns that the region was
heading back into recession in the third quarter.

A weaker dollar tends to lift the price of commodities such as
oil by making it cheaper for investors holding other currencies.
The euro was up to $1.3806 from $1.3669 late Monday in New York,
while the dollar weakened to 76.58 yen from 76.66 yen. The
Paris-based IEA said it was now expecting global demand to rise
to 89.2 million barrels a day this year -- 1 million barrels more
than in 2010 -- and to 90.5 million barrels a day in 2012.
Compared with last month's forecasts, these revisions were lower
by 50,000 barrels a day for 2011 and by 210,000 barrels a day for
2012. - west coast foreclosures fall

New foreclosure actions in states along the country’s West
Coast returned to levels in line with prior months during
September, according to ForeclosureRadar, a California-based
company that tracks every foreclosure in its five-state coverage
area. The leveling off in September follows a strong surge in
foreclosure starts during the month of August in the western
states of Arizona, California, Nevada, Oregon, and Washington,
and puts new foreclosure tallies far below the numbers seen at
the peak of each state’s foreclosure activity.

ForeclosureRadar reports California has seen a drop in activity
of 56% since its peak, from 58,623 notice of default filings in
March of 2009 to 25,778 today. Arizona shows a similar swing in
notice of trustee sale filings, from 14,722 in March of 2009 to
5,982 filings last month – a decrease of 59.4%. Washington has
experienced the greatest decline of all, with 71.5% fewer notice
of trustee sale filings today than at their peak in June of 2009.

Foreclosure sales were mixed last month, with declines in
Arizona, California, and Nevada, while Oregon and Washington both
showed increases. Despite declines in three of the five states,
ForeclosureRadar notes that the percentage of foreclosure sales
that went to third parties, typically investors, was at or near
peak levels. In California, third parties purchased a record
27.4% of all foreclosure sales last month. In Arizona, that
number was even higher at 38.3%, also a record. Nevada was just
shy of its record, set in August at 29.1%. Sales to third
parties in Washington were up 15.6%, a record for this year.
Oregon was the only state to show a decrease, down from 15.5% in
July to 6.0% last month. “While foreclosure activity returned
to its normal course in September, we fully expect to see more
volatility like we saw in August as banks continue to work in
fits and starts through robo-signing and other issues,” said
Sean O’Toole, founder and CEO of ForeclosureRadar. “It’s
almost unfathomable that four years into this crisis there would
still be so much uncertainty on how to best deal with the
trillions in bad mortgage debt that was created during the credit
bubble,” O’Toole added.

BOA offers cash for short sales

Bank of America (BOA), the nation's largest mortgage servicer, is
offering Florida homeowners up to $20,000 to short sale their
homes rather than letting them linger in foreclosure. The
limited time offer has received little promotion from the
Charlotte, N.C.-based bank, which sent emails to select Florida
Realtors earlier this week outlining basic details of the plan.
Only homeowners whose short sales are submitted for approval to
BOA before Nov. 30 will qualify. The homes must have no offers on
them already and the closing must occur before Aug. 31, 2012.
Realtors say the BOA plan, which has a minimum payout amount of
$5,000, is a genuine incentive to struggling homeowners who may
otherwise fall into Florida's foreclosure abyss. The current
timeline to foreclosure in Florida is an average of 676 days -
nearly two years - according to real estate analysis company
RealtyTrac. The national average foreclosure timeline is 318
days. Guy Cecala, chief executive officer and publisher of
Inside Mortgage Finance, called the short sale payout a "bribe."
"You can call it a relocation fee, but it's basically a bribe to
make sure the borrower leaves the house in good condition and in
an orderly fashion," Cecala said. "It makes good business sense
considering you may have to put $20,000 into a foreclosed home to
fix it up." Homeowners, especially ones who feel cheated by the
bank, have been known to steal appliances and other fixtures, or
damage the home.

A spokesman for BOA said the program is being tested in Florida,
and if successful, could be expanded to other states. Wells
Fargo and J.P. Morgan Chase have similar short sale programs,
sometimes called "cash for keys." Wells Fargo spokesman Jason
Menke said his company offers up to $20,000 on eligible short
sales that are left in "broom swept" condition. Although the
program is not advertised, deals are mostly made on homes in
states with lengthy foreclosure timelines, he said. And caveats
exist. The Wells Fargo short sale incentive is only good on first
lien loans that it owns, which is about 20% of its total
portfolio. BOA's plan excludes Ginnie Mae, Federal Housing
Administration and VA loans. Similar to the federal Home
Affordable Foreclosure Alternatives program, or HAFA, which
offers $3,000 in relocation assistance, the BOA program may also
waive a homeowner's deficiency judgment at closing. A deficiency
judgment in a short sale is basically the difference between what
the house sells for and what is still owed on the loan. HAFA,
which began in April 2010, has seen limited success with just
15,531 short sales completed nationwide through August.

Hiring picks up

Employers added 103,000 jobs in the month, the Labor Department
reported Friday. And July and August were both revised higher,
showing an additional gain of 99,000 jobs over the summer.
Businesses added 137,000 jobs, including 45,000 Verizon strikers
who returned to work last month. But that hiring was slightly
offset by a loss of 34,000 public jobs, mostly at the local
government level. Economists had predicted the private sector
would add 90,000 workers in the month. Meanwhile, the
unemployment rate remained at 9.1% in August, in line with
economists' forecasts. Even with the pickup in hiring,
September's report was still considered relatively weak. So far,
the economy has recovered only a fraction million of the 8.7
million jobs lost since the recession began. And economists often
say the economy needs to add at least 150,000 jobs a month just
to keep pace with population growth.

Olick - rates, prices, demand all falls

"When mortgage rates first fell below five% in 2009, we called it
an emotional landmark, a level that, while not significantly
different from the previous week or month, would send up a flag
to borrowers that it was time to buy or at least to refinance.
And they did. Now the 30-year fixed has fallen below four%, and
it all seems suddenly like white noise. As mortgage rates fell
last week, so too did mortgage applications, for both refinances
and purchases. Lower rates usually spur refinances, but those
actually fell the most, down 5.2% week-to-week, according to the
Mortgage Bankers Association. Applications to purchase a home
fell just 0.8%, but they are at historic lows as it is, down 12%
from a year ago.

The Mortgage Bankers said potential borrowers, 'largely remained
on the sidelines, seemingly unimpressed,' by these rates, which
we haven't seen since the 1940's. Perhaps they were unimpressed,
or perhaps they were just scared straight by the impetus for the
low rates, which was the rush to Treasuries spurred by a global
economic crisis. Hmmm. They may also be on the sidelines
because, after a brief and delayed Spring bounce in home prices,
values are slipping once again. Home prices fell month to month
for the first time in four months, according to a new report from
CoreLogic. Another index from Clear Capital, which uses a running
quarter, found prices softening in September quarter to quarter,
after several strong months. 'The company forecasts additional
declines through the first quarter and potential for a triple-dip
in the housing market.'

I'm not sure what a 'triple-dip' is, since I'm not at all
convinced we were coming out of the double dip that started after
the end of the home buyer tax credit. So many housing watchers
fail to note that even in a crisis, housing continues to be a
highly seasonal business, and prices always rise in the Spring,
even if only slightly. So we saw some price gains in the last
several reports, but they were all still down annually, and down
from some pretty weak numbers to begin with. Home sales bumped a
bit, but not significantly and not nearly enough to spell
recovery. This as foreclosure starts jumped nearly 20% in August
from July to a 2011 high, according to Lender Processing
Services. So back to the new record-low mortgage rates. They
will likely do nothing to spur home buying, but they will provide
all kinds of fodder for the current administration to push some
kind of enhanced refinance program, which is supposedly targeted
at borrowers who are not behind on their mortgages. As the
political season heats up, and housing cools down for the winter,
there will surely be plenty of shouting at the wind over
potential housing stimulus/bailouts, while behind the curtain,
politicians, from those in power to those fighting for power,
have largely thrown their hands up in despair."

Solyndra was a waste

Political furor over the Solyndra bankruptcy has dealt a body
blow to the idea that the US government should try to help clean
tech start-ups through the costly "valley of death" to commercial
viability. The capital needed to commercialize cutting-edge,
renewable energy technology is seen as too risky for both venture
capitalists and for the banks. The Obama administration has
marshaled a patchwork of loans, guarantees, tax credits and
grants to bridge the gap, trying to use the programs to spur the
languishing industry at a time the US economy was in dire need of
jobs. But congressional support for the financing is about to
dry up. Six of 10 key clean energy financing and tax programs
will expire by the end of December. And headlines about
Solyndra—the solar panel maker that filed for bankruptcy after
burning through $535 million in government loans—has damaged
confidence in government involvement.

Solyndra, backed by more than $1 billion in venture capital, got
a massive cash infusion as the first recipient of a loan
guarantee from the Energy Department under a program expanded and
highly touted by the Obama administration, as it looked to the
green tech sector to spur job creation. Its factory was toured
and praised by Obama, misgivings from some government analysts
and warnings from venture capitalists about the company's lack of
cash. Those concerns have come to light through an eight-month
investigation by Republicans in the House of Representatives. The
FBI raided the company last month. The timing of the company's
downfall, coming ahead of the 2012 presidential election,
produced a political maelstrom. Republicans have alleged poor
management and political favoritism led to the ill-fated loans
because Solyndra's investors included an Obama
fundraiser—charges that the administration has aggressively
disputed. Obama has defended the program, which has guaranteed
more than $16 billion in loans, saying some failures had been
expected. He also accused Republicans of giving up on renewable
energy while China and other countries offer the sector cheap
capital. Republicans believe the government should stay out of
the private sector, and that cutting the gaping deficit is more
important than trying to support manufacturers of risky renewable
energy technology.

Home ownership sees biggest drop since Great Depression

The percentage of Americans who owned their homes has seen its
biggest decline since the Great Depression, according to the US
Census Bureau. The rate of home ownership fell to 65.1% in April
2010, 1.1 percentage points lower than it was in 2000. The
decline was the biggest drop since the 1930s, when home ownership
plunged 4.2%. The most recent decade-over-decade drop, however,
only tells half the story. Home ownership during the 2000s "was
really high in the middle of the decade, up to almost 70% at one
point around 2004," said Ellen Wilson, a survey statistician with
the bureau. The crash from that peak was more than 4 percentage
points in just about five years -- a far more dramatic decline
than the 1.1% drop over the 10-year period. Certain regions have
been hit harder than others. The West had the lowest home
ownership rate at 60.5%, while the Midwest had the highest rate
at 69.2%.The South came in at 66.7% and the Northeast at 62.2%.
Among the states, New York had the lowest home ownership rate of
53.3%, but the District of Columbia's home ownership rate was
below that at 42%. West Virginia (73.4%) led the way with the
highest home ownership rate, while Minnesota (73%), Michigan,
Delaware and Iowa (all 72.1%) were also well above the norm.

The number of vacant homes also grew by 44%. Thanks to the
housing bust there has been a substantial increase in empty
homes. The number of vacant housing units jumped an astonishing
43.8% to 15 million (or 11.4% of all housing units) in 2010, up
from 10.4 million in 2000. During that 10-year period, the
number of homes in the US increased by 16 million to 131.7
million housing units, according to Census. Many Sun-Belt states
suffered large vacancy increases. In Nevada, ground zero for
foreclosures over the past few years, vacancies grew nearly 120%
to 14.3% of all homes. Georgia vacancies jumped 82.7%, Florida's
62.6% and Arizona's 61%. Although vacancies in Maine grew by
only 23%, the state had the highest percentage of vacant homes
overall at 22.8%. Vermont was close behind with 20.5% of its
homes empty. Florida was third with 17.5%.

Many of the nation's residents have also become renters,
especially in large metropolitan areas. Of the 10 largest
cities, New York had the highest ratio with a whopping 69% of all
homes in the five boroughs -- Manhattan, Brooklyn, Queens, the
Bronx and Staten Island -- occupied by renters. Los Angeles had a
61.5% rental rate and Dallas was 55.9%. San Jose had the lowest
percentage of renters for any of the 10 largest cities with just
41.5%. San Antonio (43.5.%) and Phoenix (42.4%) had comparatively
few renters as well.

Obama campaigns on job bill

Declaring the US economy "really needs a jolt right now,"
President Obama again urged Congress to pass his $447 billion
jobs bill during a press conference yesterday. "What's true is
we've also got to rein in our deficits and live within our means,
which is why this jobs bill is fully paid for by asking
millionaires and billionaires(as if there's no difference between
the two) to pay their fair share," the President said, restating
his support of the so-called Buffett Rule. Obama also said he is
"comfortable" with the millionaire's surtax Senate Majority
Leader Harry Reid has proposed. "Some see this as class
warfare," the President said. "I see it as a simple choice: We
can either keep taxes as -- exactly as they are for millionaires
and billionaires, with loopholes that lead them to have lower tax
rates in some cases than plumbers and teachers, or we can put
teachers and construction workers and veterans back on the job."
(I'm sure others see it as a false dichotomy - between
"millionaires and billionaires" and "teachers and construction
workers and veterans.") In addition (or instead of) class
warfare, some see this as naked politicking by a President
suffering from flagging poll numbers. "We're legislating. He's
campaigning. It's very disappointing," House Speaker John Boehner
said in response to Obama's press conference. "Nothing has
disappointed me more than what has happened in the last five
weeks... To watch the president of the United States give up on
governing, give up on leading and just spend time campaigning."

Money for "fair housing"

The Department of Housing and Urban Development awarded more than
$28 million in grants to non-profits to combat housing
discrimination. The agency provided funds to 84 organizations in
33 states and Washington, D.C., through its Fair Housing
Initiatives Program to help investigate allegations of housing
discrimination. "The Obama Administration is committed to ending
housing discrimination, and these grants enable local fair
housing and community organizations all over the nation to help
HUD enforce the Fair Housing Act, and make people more aware of
their fair housing rights," HUD Secretary Shaun Donovan said.
HUD said about $17.5 million of the grant money will be used to
investigate housing discrimination, $4.6 million to educate the
public about housing rights and $5.9 million to serve rural and
immigrant populations in areas where there are no standing fair
housing organizations

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