NOVEMBER 13, 2008, 9:39 A.M. ET
HUD Unveils New Rules for Mortgages
By JAMES R. HAGERTY
The Department of Housing and Urban Development announced rules aimed at helping Americans shop for mortgages more effectively, but said it lacks powers to enforce those rules.
The rules update requirements of the Real Estate Settlement Procedures Act, known as Respa, a 1974 law that sets standards for home-purchase transactions. HUD Secretary Steve Preston said changes were needed because "many people made uninformed decisions" in taking out loans. That, he said, contributed to a surge in mortgage defaults.
HUD, which pushed ahead with the rules despite opposition from lenders and others involved in mortgage transactions, estimated the changes will bring savings of nearly $700 in loan-closing costs for the typical consumer.
In a news conference, HUD officials conceded they lack legal authority to penalize violators of the rule. Legislation would be required to give HUD those powers. But they said state and federal regulators of lenders and brokers can insist on compliance with federal rules and that the threat of class-action suits may keep lenders in line.
The rules require a three-page "good-faith estimate" for borrowers explaining rates, fees, any prepayment penalties and the possibility of later increases in monthly payments. HUD said it shrank that form from four pages to three in response to industry complaints.
The rules also limit to 10% the maximum amount certain fees can increase from the initial estimate. A new HUD-1 form, provided to consumers before they sign loan documents, is designed to help consumers more easily compare what they were promised with what they are actually being charged. One problem is that consumers may see that HUD-1 form only shortly before the closing, when they are pressed for time and may feel it is too late to resume their mortgage shopping.
HUD said the rules will help consumers understand how much a broker is being paid in fees, often called "yield spread premiums." But Rebecca Borne, a lawyer at the Center for Responsible Lending, a nonprofit group pushing for changes in mortgage regulation, said the new HUD forms fail to make those fees clear and won't prevent abuses of them.
Lenders and brokers will have until Jan. 1, 2010, to start using the forms. HUD dropped a provision that would have required a lengthy "script" to be read to borrowers at the closing table, setting out terms of the loan.
Monday, November 17, 2008
Saturday, November 15, 2008
Denver Area Apartment Rental Report
Denver-area apartment vacancies rise
By John Rebchook, Rocky Mountain News
Published October 28, 2008 at 7:54 a.m.
Apartment vacancy rates in the Denver Metro area increased to 6.5 percent during the third quarter of 2008, rising from 5.3 percent during the same period last year, according to a report released this morning.
The third-quarter vacancy rate also rose from 6.2 percent in the second quarter and is the highest vacancy rate in six quarters, according to the report by by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs' Division of Housing.
The vacancy rate has not dropped below 5 percent since the first quarter of 2001, and they peaked at 13.1 percent during the first half of 2003.
Adams County reported the highest vacancy rate of 7.5 percent, and the Boulder/Broomfield area reported the lowest rate at 4.7 percent. All areas except Boulder/Broomfield and Douglas County reported increases in vacancies since the second quarter. Vacancy rates for all counties surveyed were: Adams, 7.5 percent; Arapahoe, 6.9 percent; Boulder/Broomfield, 4.7 percent; Denver, 6.0 percent; Douglas, 5.9 percent; and Jefferson, 6.5 percent.
In general, a vacancy rate of 5 percent is considered the "equilibrium" rate. Rates below 5 percent indicate tight markets.
The third quarter's increase marks the second quarter in a row during which vacancy rates have increased, although vacancies have historically declined during the second and third quarters.
"There's clearly some softness in the market given the increases in concessions and vacancies," Gordon Von Stroh, a professor of Business at the University of Denver, and the vacancy report's author. "It remains to be seen how much the national economy will affect the local markets."
Average rents during the third quarter hit a new high of $892.22, increasing 33 dollars since the third quarter of last year. Although rents have been increasing, rental losses from discounts and concessions have also been increasing since the third quarter of last year.
The highest average rent was reported in Douglas County at $1051.05, and the lowest was reported in Jefferson County at $847.43. Average rents for all counties were: Adams, $882.52; Arapahoe, $850.72; Boulder/Broomfield, $974.68; Denver, $906.12; Douglas, $1051.05; and Jefferson, $847.43.
Although vacancies are increasing, few predict substantial declines in occupancies in the metro area.
"It's much more difficult to buy a home today than it was a couple of years ago, so people are looking to rental housing," said Kathi Williams, Director of the Colorado Division of Housing. "That's good news for apartment owners."
The Vacancy and Rent Surveys are a service provided by the Colorado Department of Local Affairs' Colorado Division of Housing and the Apartment Association of Metro Denver to renters and the multi-family housing industry on a quarterly basis.
By John Rebchook, Rocky Mountain News
Published October 28, 2008 at 7:54 a.m.
Apartment vacancy rates in the Denver Metro area increased to 6.5 percent during the third quarter of 2008, rising from 5.3 percent during the same period last year, according to a report released this morning.
The third-quarter vacancy rate also rose from 6.2 percent in the second quarter and is the highest vacancy rate in six quarters, according to the report by by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs' Division of Housing.
The vacancy rate has not dropped below 5 percent since the first quarter of 2001, and they peaked at 13.1 percent during the first half of 2003.
Adams County reported the highest vacancy rate of 7.5 percent, and the Boulder/Broomfield area reported the lowest rate at 4.7 percent. All areas except Boulder/Broomfield and Douglas County reported increases in vacancies since the second quarter. Vacancy rates for all counties surveyed were: Adams, 7.5 percent; Arapahoe, 6.9 percent; Boulder/Broomfield, 4.7 percent; Denver, 6.0 percent; Douglas, 5.9 percent; and Jefferson, 6.5 percent.
In general, a vacancy rate of 5 percent is considered the "equilibrium" rate. Rates below 5 percent indicate tight markets.
The third quarter's increase marks the second quarter in a row during which vacancy rates have increased, although vacancies have historically declined during the second and third quarters.
"There's clearly some softness in the market given the increases in concessions and vacancies," Gordon Von Stroh, a professor of Business at the University of Denver, and the vacancy report's author. "It remains to be seen how much the national economy will affect the local markets."
Average rents during the third quarter hit a new high of $892.22, increasing 33 dollars since the third quarter of last year. Although rents have been increasing, rental losses from discounts and concessions have also been increasing since the third quarter of last year.
The highest average rent was reported in Douglas County at $1051.05, and the lowest was reported in Jefferson County at $847.43. Average rents for all counties were: Adams, $882.52; Arapahoe, $850.72; Boulder/Broomfield, $974.68; Denver, $906.12; Douglas, $1051.05; and Jefferson, $847.43.
Although vacancies are increasing, few predict substantial declines in occupancies in the metro area.
"It's much more difficult to buy a home today than it was a couple of years ago, so people are looking to rental housing," said Kathi Williams, Director of the Colorado Division of Housing. "That's good news for apartment owners."
The Vacancy and Rent Surveys are a service provided by the Colorado Department of Local Affairs' Colorado Division of Housing and the Apartment Association of Metro Denver to renters and the multi-family housing industry on a quarterly basis.
Monday, November 10, 2008
No Sale: A Bad Agent, or a Lousy Market?
Here's how to tell whether your agent is suffering from market malaise.
By JUNE FLETCHER Wall Street Journal
My 12-year-old home has been on the market for almost three months now. It's in excellent shape, and from the start we set the price close to recent comparable sales, at our agent's recommendation. In the beginning, we got a lot of showings, but lately, nothing. Our listing agreement is about to expire, and we can't decide whether to keep this agent. (Since we've already moved away, it would be tough to interview new agents.) How we can tell whether our current agent is doing a good job, or if the problem is just this horrible real estate market?
It's easy to get depressed about selling your house these days, when bad news about the housing market crops up daily. It's especially discouraging when you've been keeping up your home, following professional advice about staging and are trying to be clear-sighted about your price.
That real estate agents, as well as sellers, can get into a blue funk these days about the real estate market is also understandable—but far less forgivable. Given that you typically pay $25,000 in real estate commissions on a $500,000 house, you deserve an all-out effort to bring in buyers. And the blitz should be unrelenting, not just when the listing is fresh.
Too often, that's not what I'm seeing. I'm not sure whether it's caused by despondency over market conditions, laziness or simply incompetence, but many agents are overlooking the basic tenets of marketing these days.
To illustrate, I've been randomly driving around Northern Virginia for the past several months looking at homes for sale in the $500,000 to $1 million range. In many cases, the for-sale signs have plastic boxes to hold listing sheets and brochures, but inevitably, these are empty. So home shoppers must guess if the home fits their basic needs and price range before calling the agent, which some people find intimidating or embarrassing, especially if the home turns out to be above their price range.
Then there's the question of open houses. Although sellers often insist on them, many agents can't be bothered to do them any more—or they just hold so-called "broker's opens" for the benefit of fellow real estate agents. Worse, many of the agents who do hold open houses spend their time hanging out in the kitchen rather than engaging buyers in conversation and determining their ability and willingness to buy (I've been to some where the agent didn't even ask me my name). The oft-repeated rationale that no one ever buys a home they've seen at an open house is simply untrue—in fact, a buyer did exactly that when I sold my first home in the late '80s.
Similarly, according to an article written last month by Bill Shue, president of Realty U Group in Aliso Viejo, Calif., for National Realty News, a Web site targeted to Realtors, some agents are failing to return buyers' e-mails promptly. He cites one instance where 50 real estate agents were sent an urgent e-mail message from a buyer saying he was in town and wanted to buy immediately; all failed to respond. He also criticizes agents who spend a lot of money to drive traffic to their Web sites, but fail to provide enough "content rich" material when they arrive.
I can appreciate how hard it is for agents to stay motivated and upbeat when anxious sellers are constantly pushing them for results. And having to handle more listings, for a longer period of time, during these troubled times is a double burden.
But sellers shouldn't be shortchanged. That's why it's critical for you to do some detective work before you relist with this agent. Ask a friend from the old neighborhood to go to check your brochure box, visit your open house and send an e-mail asking a few questions about your listing. You'll soon learn whether the problem with selling your house lies with the market or the marketing.
By JUNE FLETCHER Wall Street Journal
My 12-year-old home has been on the market for almost three months now. It's in excellent shape, and from the start we set the price close to recent comparable sales, at our agent's recommendation. In the beginning, we got a lot of showings, but lately, nothing. Our listing agreement is about to expire, and we can't decide whether to keep this agent. (Since we've already moved away, it would be tough to interview new agents.) How we can tell whether our current agent is doing a good job, or if the problem is just this horrible real estate market?
It's easy to get depressed about selling your house these days, when bad news about the housing market crops up daily. It's especially discouraging when you've been keeping up your home, following professional advice about staging and are trying to be clear-sighted about your price.
That real estate agents, as well as sellers, can get into a blue funk these days about the real estate market is also understandable—but far less forgivable. Given that you typically pay $25,000 in real estate commissions on a $500,000 house, you deserve an all-out effort to bring in buyers. And the blitz should be unrelenting, not just when the listing is fresh.
Too often, that's not what I'm seeing. I'm not sure whether it's caused by despondency over market conditions, laziness or simply incompetence, but many agents are overlooking the basic tenets of marketing these days.
To illustrate, I've been randomly driving around Northern Virginia for the past several months looking at homes for sale in the $500,000 to $1 million range. In many cases, the for-sale signs have plastic boxes to hold listing sheets and brochures, but inevitably, these are empty. So home shoppers must guess if the home fits their basic needs and price range before calling the agent, which some people find intimidating or embarrassing, especially if the home turns out to be above their price range.
Then there's the question of open houses. Although sellers often insist on them, many agents can't be bothered to do them any more—or they just hold so-called "broker's opens" for the benefit of fellow real estate agents. Worse, many of the agents who do hold open houses spend their time hanging out in the kitchen rather than engaging buyers in conversation and determining their ability and willingness to buy (I've been to some where the agent didn't even ask me my name). The oft-repeated rationale that no one ever buys a home they've seen at an open house is simply untrue—in fact, a buyer did exactly that when I sold my first home in the late '80s.
Similarly, according to an article written last month by Bill Shue, president of Realty U Group in Aliso Viejo, Calif., for National Realty News, a Web site targeted to Realtors, some agents are failing to return buyers' e-mails promptly. He cites one instance where 50 real estate agents were sent an urgent e-mail message from a buyer saying he was in town and wanted to buy immediately; all failed to respond. He also criticizes agents who spend a lot of money to drive traffic to their Web sites, but fail to provide enough "content rich" material when they arrive.
I can appreciate how hard it is for agents to stay motivated and upbeat when anxious sellers are constantly pushing them for results. And having to handle more listings, for a longer period of time, during these troubled times is a double burden.
But sellers shouldn't be shortchanged. That's why it's critical for you to do some detective work before you relist with this agent. Ask a friend from the old neighborhood to go to check your brochure box, visit your open house and send an e-mail asking a few questions about your listing. You'll soon learn whether the problem with selling your house lies with the market or the marketing.
Saturday, November 08, 2008
JP Morgan Chase's Plan to Help Delinquent Mortgages
Massive Effort to Save Mortgages
By Robin Sidel 11/01/08 Wall Street Journal
JP Morgan Chase & Co. launched an ambitious plan Friday to modify the terms of $70 billion in mortgages for borrowers who are behind on their payments or soon could be.
The move by the New York bank will cover as many as 400,000 borrowers. They'll be moved into loans carrying lower interest rates, smaller principal amounts or other more-affordable terms.
The changes will particularly focus on a type of loan structured in such a way that the borrower's outstanding balance sometimes grows month after month. J.P. Morgan inherited $54 billion of such loans with its takeover of the beleaguered thrift Washington Mutual Inc. in September.
The plan comes amid intense national focus on a root cause of global financial turmoil: rising home foreclosures, and what the role of banks and government should be in helping struggling homeowners. The banking industry is under much political pressure address the foreclosure problem.
Rival Bank of America Corp. has two loan-modification pools in place, one hashed out with state attorneys general. At the government level, after other programs failed to halt the rise in foreclosures, the Federal Deposit Insurance Corp. recently floated a plan that could help three million troubled borrowers; it is being considered by the White House. The FDIC also is assisting strapped borrowers who had mortgages with IndyMac Bancorp, which the FDIC seized this summer.
Such moves would tackle one of the last elements of the global financial upheaval as yet untouched by a major federal program. The mortgage crunch that began in the middle of last year spawned the financial crisis. Big financial players had invested trillions of dollars in securities backed by risky mortgages, which starting in mid-2007 became difficult to value. Banks hobbled by these bad investments reined in lending, spawning the wider credit crunch as a result.
The U.S. government has tackled problems in the banking system and credit markets, but thus far hasn't succeeding in stanching the bleeding of failing homeowners. Economists and government officials agree that the economy and financial markets can't fully revive until there's a halt to the decline in housing prices, a phenomenon that is worsened by foreclosures.
"It doesn't make sense for us to wait" to tackle the problem, said a J.P. Morgan executive, Charles Scharf. "We've heard loud and clear and are listening to what some of the thought leaders around the country are saying." Mr. Scharf runs the retail division, which includes mortgages and branch banking, at J.P. Morgan, the largest U.S. bank in stock-market value.
The move also suggests that banks are realizing they can improve the value of their loan portfolios through mass modifications rather than foreclosures, which tend to produce larger losses. Until now, mortgage holders have been reluctant to renegotiate loans or have been doing so one-by-one, a time-consuming process. The bundling of loans into securities that are then sold to investors further complicates matters.
The announcement by J.P. Morgan steps up pressure on other mortgage companies to respond with relief programs for stressed borrowers, said Stuart Feldstein, president and co-founder of SMR Research Corp., a Hackettstown N.J., firm that specializes in consumer lending. "The precedent has clearly been set and we can expect to see more of these," he said.
Nationwide, 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010, about triple the usual rate, according to Moody's Economy.com, a research firm. Some 4.3 million of those are expected to lose their homes.
J.P. Morgan's exposure to the problems increased sharply when it acquired the assets of the Seattle-based Washington Mutual. WaMu, which was seized by regulators, had a large exposure to the difficult housing market of California. In taking it over, J.P. Morgan acquired $16 billion of subprime mortgages.
The mortgages affected by J.P. Morgan's program represent 4.7% of the home loans it owns or that are serviced by one of the bank's units, EMC Mortgage Corp. While the program to give these mortgages easier terms is likely to cost J.P. Morgan billions of dollars in interest payments and loan fees, it is also likely to save the bank from the costly and lengthy process of foreclosing homes and selling them. The plan expands upon programs already in place at the bank to help strapped homeowners.
The bank's Mr. Scharf declined to estimate the plan's financial impact on the bank. "Our goal in doing this was to come up with something that we think will lead the industry in helping as much as possible on this issue," he said.
J.P. Morgan's push is especially aimed at so-called option adjustable-rate mortgages, or options ARMs. These allow borrowers to make a minimum payment that may not even cover the interest due -- resulting in a higher loan balance.
Under the plan, option ARMs that are accumulating interest will be replaced with fixed-rate loans that are more stable for borrowers and seen as far less likely to default. J.P. Morgan said it wouldn't begin the foreclosure process on borrowers during the next 90 days, as it opens loan-counseling centers and takes other steps to launch the program.
J.P. Morgan unveiled the plan days after receiving $25 billion in federal capital from the Treasury's program to shore up financial institutions and get credit flowing. Mr. Scharf declined to comment on whether the bank would use any of those funds for the mortgage overhaul. "The stronger you are, the more willing you are to spend money and do a whole series of things," he said, noting that the government cash "certainly makes decisions easier."
Of the two loan-modification pools at rival Bank of America, one targets 265,000 borrowers with all types of mortgages. The other was hashed out with 14 state attorneys generals and involves 400,000 subprime and option-ARM customers serviced by the big lender Countrywide Financial Corp., which Bank of America purchased July 1.
Another big rival bank, Wachovia Corp., acquired roughly $120 billion of option ARMs as part of its 2006 purchase of Golden West Financial Corp. Wachovia initiated a loan-refinancing program before agreeing to its pending takeover by Wells Fargo & Co. That effort targets the option-ARM portfolio.
J.P. Morgan's plan drew cautious optimism from Iowa Attorney General Thomas Miller, who recently called on mortgage lenders to launch broad loan-modification programs.
John Taylor, chief executive of the National Community Reinvestment Coalition, called it "a gutsy move on their part," adding : "They are bending over backward to try to reach out to these people." The coalition represents 600 community groups and has urged the government and industry to help homeowners.
Republican presidential candidate John McCain has gone further than any program in place, proposing a to have the government buy $300 billion in troubled mortgages outright.
By Robin Sidel 11/01/08 Wall Street Journal
JP Morgan Chase & Co. launched an ambitious plan Friday to modify the terms of $70 billion in mortgages for borrowers who are behind on their payments or soon could be.
The move by the New York bank will cover as many as 400,000 borrowers. They'll be moved into loans carrying lower interest rates, smaller principal amounts or other more-affordable terms.
The changes will particularly focus on a type of loan structured in such a way that the borrower's outstanding balance sometimes grows month after month. J.P. Morgan inherited $54 billion of such loans with its takeover of the beleaguered thrift Washington Mutual Inc. in September.
The plan comes amid intense national focus on a root cause of global financial turmoil: rising home foreclosures, and what the role of banks and government should be in helping struggling homeowners. The banking industry is under much political pressure address the foreclosure problem.
Rival Bank of America Corp. has two loan-modification pools in place, one hashed out with state attorneys general. At the government level, after other programs failed to halt the rise in foreclosures, the Federal Deposit Insurance Corp. recently floated a plan that could help three million troubled borrowers; it is being considered by the White House. The FDIC also is assisting strapped borrowers who had mortgages with IndyMac Bancorp, which the FDIC seized this summer.
Such moves would tackle one of the last elements of the global financial upheaval as yet untouched by a major federal program. The mortgage crunch that began in the middle of last year spawned the financial crisis. Big financial players had invested trillions of dollars in securities backed by risky mortgages, which starting in mid-2007 became difficult to value. Banks hobbled by these bad investments reined in lending, spawning the wider credit crunch as a result.
The U.S. government has tackled problems in the banking system and credit markets, but thus far hasn't succeeding in stanching the bleeding of failing homeowners. Economists and government officials agree that the economy and financial markets can't fully revive until there's a halt to the decline in housing prices, a phenomenon that is worsened by foreclosures.
"It doesn't make sense for us to wait" to tackle the problem, said a J.P. Morgan executive, Charles Scharf. "We've heard loud and clear and are listening to what some of the thought leaders around the country are saying." Mr. Scharf runs the retail division, which includes mortgages and branch banking, at J.P. Morgan, the largest U.S. bank in stock-market value.
The move also suggests that banks are realizing they can improve the value of their loan portfolios through mass modifications rather than foreclosures, which tend to produce larger losses. Until now, mortgage holders have been reluctant to renegotiate loans or have been doing so one-by-one, a time-consuming process. The bundling of loans into securities that are then sold to investors further complicates matters.
The announcement by J.P. Morgan steps up pressure on other mortgage companies to respond with relief programs for stressed borrowers, said Stuart Feldstein, president and co-founder of SMR Research Corp., a Hackettstown N.J., firm that specializes in consumer lending. "The precedent has clearly been set and we can expect to see more of these," he said.
Nationwide, 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010, about triple the usual rate, according to Moody's Economy.com, a research firm. Some 4.3 million of those are expected to lose their homes.
J.P. Morgan's exposure to the problems increased sharply when it acquired the assets of the Seattle-based Washington Mutual. WaMu, which was seized by regulators, had a large exposure to the difficult housing market of California. In taking it over, J.P. Morgan acquired $16 billion of subprime mortgages.
The mortgages affected by J.P. Morgan's program represent 4.7% of the home loans it owns or that are serviced by one of the bank's units, EMC Mortgage Corp. While the program to give these mortgages easier terms is likely to cost J.P. Morgan billions of dollars in interest payments and loan fees, it is also likely to save the bank from the costly and lengthy process of foreclosing homes and selling them. The plan expands upon programs already in place at the bank to help strapped homeowners.
The bank's Mr. Scharf declined to estimate the plan's financial impact on the bank. "Our goal in doing this was to come up with something that we think will lead the industry in helping as much as possible on this issue," he said.
J.P. Morgan's push is especially aimed at so-called option adjustable-rate mortgages, or options ARMs. These allow borrowers to make a minimum payment that may not even cover the interest due -- resulting in a higher loan balance.
Under the plan, option ARMs that are accumulating interest will be replaced with fixed-rate loans that are more stable for borrowers and seen as far less likely to default. J.P. Morgan said it wouldn't begin the foreclosure process on borrowers during the next 90 days, as it opens loan-counseling centers and takes other steps to launch the program.
J.P. Morgan unveiled the plan days after receiving $25 billion in federal capital from the Treasury's program to shore up financial institutions and get credit flowing. Mr. Scharf declined to comment on whether the bank would use any of those funds for the mortgage overhaul. "The stronger you are, the more willing you are to spend money and do a whole series of things," he said, noting that the government cash "certainly makes decisions easier."
Of the two loan-modification pools at rival Bank of America, one targets 265,000 borrowers with all types of mortgages. The other was hashed out with 14 state attorneys generals and involves 400,000 subprime and option-ARM customers serviced by the big lender Countrywide Financial Corp., which Bank of America purchased July 1.
Another big rival bank, Wachovia Corp., acquired roughly $120 billion of option ARMs as part of its 2006 purchase of Golden West Financial Corp. Wachovia initiated a loan-refinancing program before agreeing to its pending takeover by Wells Fargo & Co. That effort targets the option-ARM portfolio.
J.P. Morgan's plan drew cautious optimism from Iowa Attorney General Thomas Miller, who recently called on mortgage lenders to launch broad loan-modification programs.
John Taylor, chief executive of the National Community Reinvestment Coalition, called it "a gutsy move on their part," adding : "They are bending over backward to try to reach out to these people." The coalition represents 600 community groups and has urged the government and industry to help homeowners.
Republican presidential candidate John McCain has gone further than any program in place, proposing a to have the government buy $300 billion in troubled mortgages outright.
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