More Shake Up at the CFPB?

Buzz at the Consumer Financial Protection Bureau is that director Richard Cordray is thinking about leaving the agency when his recess appointment expires at the end of next year, rather than go through another contentious confirmation battle.

A spokesperson at the bureau said Cordray, often talked about as a potential Democratic gubernatorial nominee in Ohio, has no plans to leave his job and the White House isn’t commenting. But his chances of getting confirmed are pretty much nil — and he can’t be re-recessed.

The governorship will be up for grabs in 2014, leading to speculation that Cordray will make a move. He lost earlier bids for the Senate and House.

Loop Fans may recall that Senate Republicans blocked his nomination in 2011, insisting that the administration first agree to have a five-member commission oversee the new consumer watchdog.

The stand-off left the bureau leaderless, unable to write any rules, so President Obama gave Cordray a recess appointment, an end-run that outraged Senate Republicans.

Even so, Cordray and his team forged ahead with rules to govern the financial services industry and enforcement actions to keep companies in line..

Just as the bureau is settling into the role of regulator, it is facing a potential leadership vacuum. Not only is Cordray’s term up in the coming year, but his deputy director Raj Date is stepping down on Jan.y 31.

Date, who helped build the agency from the ground up, would have been acting director in the Cordray left at the end of the year. But now it’s uncertain who would step into the role if Cordray departs.

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A rebound off the bottom

Home prices during the first half of 2012 posted their strongest gains in six years, the clearest sign that more U.S. housing markets have hit bottom.

But the housing market remains far from normal. Hitting a bottom shouldn’t be confused with a full-on recovery, which looks a ways off.

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Today’s rising prices have less to do with surging demand—though hard-hit markets in Arizona, California, and Florida have seen significant investor appetite for distressed homes—than with declines in the number of properties for sale.

Inventories of “existing” homes—that is, ones that haven’t just been built—are at eight-year lows. New-home inventories are lower than at any time since the U.S. census began tracking them in 1963. In some cities, there are one-third fewer homes listed for sale than a year ago.

Here’s why prices are rising: There are more buyers chasing fewer homes, and—critically—fewer distressed homes, such as foreclosures. Low inventory is one sign that housing markets may have reached a turning point because many want to buy at the bottom but few want to sell.

There are several factors behind the low inventory. Banks have slowed their pace of foreclosures. Investors have snapped up discounted properties that they can convert into rentals. Home builders, struggling for several years to compete on price with foreclosed properties, have added little in the way of new supply.

For now, price gains are concentrated at the low end of the market, where inventory declines have been most dramatic. “The market is really drying up in these seemingly distressed markets really quickly,” said Michael Sklarz, president of research firm Collateral Analytics. “They really are scratching for properties to sell.”

Low inventory is benefiting home builders, as buyers grow frustrated by bidding wars sparked by a shortage of move-in-ready housing. “People can’t find inventory that they want, so they say, ‘I’m just going to buy the house down the block that’s brand new. I don’t have to go through the whole torture,’ ” Mr. Sklarz said.

Housing’s progress is good news for the economy. Residential investment has now contributed to U.S. economic output for the past five quarters, which hasn’t happened since 2005. In other words, housing is no longer a drag, though it is packing far less of a punch than it normally does at this point in the economic cycle. Rising prices also could help turn around consumers’ fragile psychology, an unpredictable but important factor that can fuel more sales.

But low inventory isn’t necessarily a sign of strength. One problem is that many sellers can’t or won’t become buyers. Millions still owe more than their homes are worth, and even more—about 45% of all homeowners with a mortgage, according to data firm CoreLogic Inc.—have less than 20% in equity. That means they don’t have enough money to make a large down payment and pay their real-estate agent’s commission to buy a comparable house.

Large price declines have left cities without what historically has been the most active segment of the home-buying market: families looking to trade up and retirees seeking to downsize. That leaves many markets relying on investors and first-time buyers, who are most sensitive to rising prices and mortgage rates. Ironically, prices are rising fastest in markets that have the most underwater borrowers because so few homes are for sale.

While low inventories have helped firm up prices, they could also soon lead to year-over-year declines in sales volumes because there aren’t enough homes on the market to sustain the current sales pace.

Consider Phoenix. Home prices through June were up by 17% over the past year, the best increase among the nation’s big cities. But home sales in July fell 8% from a year ago, amid a drop in supply of more than 25%, according to a report from Mike Orr of Arizona State University.

Jon Mirmelli, a local real-estate investor, said, “Buyers aren’t happy with what they see, and they’re staying on the sidelines.”

There are other reasons for caution. Banks are still stingy with credit. Many would-be buyers have too much debt to qualify for a mortgage.

A large overhang of distressed mortgages ultimately could drive more homeowners to sell or push banks to accelerate foreclosures. This “shadow inventory” looks as if it won’t be dumped on the market in a way that would trigger deep price declines, but it would probably keep a lid on any swift gains.

Jobs and wages also aren’t growing fast enough to sustain big rises in home prices. Recent gains may be less indicative of a strong recovery and instead point to how prices in some markets “overcorrected,” bringing in investors who will step back as prices firm up.

Others worry that mortgage rates, which are down by a full percentage point from one year ago, are temporarily boosting sales and that housing demand will slump once rates rise. Compared with a year ago, mortgage rates allow borrowers to take out about 12% more in debt without increasing their monthly payment.

The changing debate over housing underscores the sector’s tentative progress. Earlier this year, the question was whether housing would hit bottom this year or next. Now, it is “about how strong any recovery will be, how long it will last, and whether it will reach every neighborhood in America,” said Glenn Kelman, chief executive of Redfin, a real-estate brokerage.

An important test comes later this year. In each of the past three years, prices rose in the summer but gave up all those gains and more in the winter, when sales traditionally slow. This year could be different because the supply of homes isn’t piling up.

Absent a shock to the economy, housing is on the mend. But it will be a long time before it returns to normal

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Recovery Update

The percentage of American homeowners behind on their mortgage payments fell during the first quarter to the lowest level since the end of 2008. But the share of loans in foreclosure remains stubbornly high, according to a survey Wednesday.

The percentage of homeowners delinquent on their mortgages in the first quarter fell to the lowest level since the end of 2008, but the share of loans in the foreclosure process remains high. Dawn Wotapka has details on Lunch Break. Photo: AP.
Housing Less Dilapidated, But Still a Fixer-Upper
At the end of March, 11.8% of all loans were at least 30 days past due or in foreclosure, the report from the Mortgage Bankers Association said. While that is still high by historical standards, it has improved steadily over the past two years, falling from 12.8% a year ago and 14.7% two years ago.

The decline in the share of homeowners late on payments was due almost entirely to fewer new cases of delinquency, a sign that households’ finances are improving. The percentage of borrowers behind on their mortgage but not in foreclosure fell to 7.4% at the end of March from 8.3% a year earlier.

“The drops we continue to see there are the best news out of this. It indicates the speed with which we’re working through the backlog” of bad loans, said Jay Brinkmann, chief economist of the Mortgage Bankers Association. The survey covers about 88% of all U.S. mortgages, or about 43 million loans.

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Separately, the Commerce Department said construction starts on new housing jumped 2.6% in April to a higher-than-expected annual rate of 717,000, suggesting that home-building—a sector with the potential to boost the wider economy—continues to improve. New permits to build homes fell 7%, though the drop was from a 3½-year high in March.

Foreclosures, however, remain a concern. Although banks initiated fewer foreclosures in the first quarter than at any time since 2007, the share of loans in the process remains high.

Some 4.4% of mortgages were in some stage of foreclosure at the end of March, unchanged from the previous quarter and down only slightly from 4.5% a year ago.

The numbers mask big variations by state. The national foreclosure rate remains elevated largely because of states that require banks to process foreclosures through the courts. In these so-called judicial states, banks have moved to take back homes very slowly since judges uncovered record-keeping abuses in foreclosure processing 18 months ago. Banks have encountered fewer hurdles in nonjudicial states.

Mortgages in Trouble
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The foreclosure rate in judicial states stands near 6.9% and has been flat or rising over the past year. Nonjudicial states have a much lower rate—about 2.8%—as they have been able to work through foreclosures quicker.

Of the 11 states with foreclosure rates above the national average, 10 of them have judicial processes. The top three are all judicial states: Florida had a foreclosure rate of 14.3% at the end of March, followed by New Jersey (8.4%) and Illinois (7.5%).

Several nonjudicial states that had severe housing problems, such as California and Arizona, have seen foreclosure rates drop below the national average. While there are signs that home prices are beginning to rise in more markets, including hard-hit Phoenix and Miami, those communities with a large “shadow” inventory of potential foreclosures could face renewed price pressure once banks take back and list for sale more of those properties.

In those states, investors have grown more confident that more foreclosures won’t be dumped on the market, said Mr. Brinkmann. There, “the market is stabilizing and people are coming back. I don’t think that’s true in Illinois right now.”

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Bank of America – Paying it back?

Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each.
The reduction for qualifying homeowners could amount to monthly savings of up to 35 percent on mortgage payments, Bank of America said in a news release on Monday evening.
The principal reduction offers from Bank of America Home Loans are the result of a $25 billion settlement agreement earlier this year with 49 state attorneys general as well as federal authorities who had been investigating allegations of abuses over the handling of foreclosures.
“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities,” Ron Sturzenegger, a legacy asset servicing executive, said in the statement.
The bank said it planned to contact more than 200,000 homeowners who could be candidates for the offers, sending letters to a majority of them by the third quarter of this year.
To be eligible for the principal reductions, however, homeowners will have to meet certain criteria, including: having a loan owned or serviced by Bank of America; owing more on the mortgage than their property is worth; and being at least 60 days behind on payments as of the end of January.
In the statement, the bank said it had started making such offers in March to a narrower group of homeowners — those who were already in the process of seeking mortgage modification. The bank estimated that the earlier wave of trial reduction offers to about 5,000 people could amount to more than $700 million in forgiven principal. But homeowners have to make at least three timely payments for the reductions to become permanent.

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Housing Market showing a recovery

US home-buying season finally signaling a recovery

By ALEX VEIGA, AP Real Estate Writers – 23 hours ago

WASHINGTON (AP) — Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery.

Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers. Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.

And many people seem to have concluded that prices won’t drop much further. In some areas, prices have begun to tick up.

Interviews with more than two dozen potential buyers, sellers, brokers, Realtors and economists suggest that confidence is up and that sales will move slowly but steadily higher.

“The biggest challenge that we’ve had over the past four years is fear — fear that the economy is collapsing, that property values are collapsing, that the world is coming to an end,” says Mark Prather, a broker at ERA Buy America Real Estate in La Palma, Calif. “The fear factor is all but gone.”

Prather says the number of prospective buyers who contacted his company last month was about 35 percent more than a year ago.

The spring buying season got an early lift-off from an uncommonly warm January and February — a winter that was the best for sales of previously occupied homes in five years. Permits to build houses and apartments rose in February to their highest level since 2008.

“People feel much more confident,” said Steve Brown, co-owner of real estate company Irongate Inc. of Dayton, Ohio, who says sales jumped more than 16 percent for the first two months of 2012 over the same period last year. “There’s no question there’s a good feeling in the marketplace.”

Some analysts detected a slight uptick in prices for February and March. CoreLogic, a real estate data firm, says prices for homes not at risk of foreclosure — about two thirds of the market — rose 0.7 percent in February. It was the first increase in four years. Price gains occurred both in some hard-hit areas, such as Phoenix, and some still-thriving areas like New York and Washington.

In Miami, the average sales price has surged 14 percent in the past year, according to Trulia, a real estate data firm. In Phoenix, the average is up 13 percent, in Pittsburgh 9 percent.

Earnings reports Friday from two big banks suggested that more people are taking out mortgages. JPMorgan Chase issued 6 percent more mortgages from January through March than it did a year ago and got 33 percent more applications. Wells Fargo issued 54 percent more mortgages and received 84 percent more applications.

Still, few think the housing industry is nearing a return to full health. For that to happen, a robust job market would be needed. More hiring would give more people the money and job security to buy. That would help boost sales and prices.

Such areas as Atlanta, suburban Las Vegas and central California show few signs of recovery. And in some others — from Seattle to Cleveland — home prices have continued to slip. The average has dropped 9 percent in Seattle over the past 12 months and 7 percent in Cleveland.

But in many parts of the country, including thriving areas of Boston, Dallas and Seattle, confidence is rising along with prices. Among the reasons:

— Hiring has strengthened. Each month from January through March generated a solid average of 212,000 jobs. Unemployment has sunk from 9.1 percent in August to 8.2 percent. More job security tends to embolden more people to invest in a home. In Dayton, for example, the University of Dayton is hiring for a new engineering research center, General Electric is hiring hundreds of contractors and the nearby Wright-Patterson Air Force Base are expanding.

— Loans remain cheap. The average rate on a 30-year fixed-rate mortgage is 3.88 percent. That’s just above the 3.87 percent reached in February — the lowest since long-term mortgages were first offered in the 1950s.

— Homes are more affordable. Nationwide, home prices are down 34 percent since 2006.

— Americans are more confident. The Thomson Reuters/University of Michigan’s survey of consumer confidence rose in March for a seventh straight month to its highest level in 13 months.

Also fueling interest are signs that home values are finally stabilizing. One factor that had slowed purchases after the housing boom ended in late 2006 was fear that a home would lose value soon after its purchase.

But the price declines slowed toward the end of 2011, according to the Wells Fargo/Case-Shiller home price index. And CoreLogic says the average price nationally rose slightly in January and February.

“Unless prices went down, I don’t think we would have ever been able to afford a home,” said John Henschel, 37, an information technology consultant who will move with his family into a five-bedroom house in Wheaton, Ill., in May. “But we feel like prices aren’t going to go back down. We’re confident. So why not?”

When the landlord on their Chicago apartment told them he was selling it, Henschel and his wife decided it was time to buy. The home they bought for nearly $450,000 could have fetched more than $570,000 six years ago, according to housing website

On a rainy Saturday this month in long-struggling Riverside, Calif., 12 families visited a three-bedroom house priced at $199,999. Ten others stopped by in the first hour of the next day’s open house. By the end of the weekend, two buyers had made offers.

“We’re seeing more buyer activity this spring than we’ve seen in probably four years,” said Liane Thomas, the broker who was showing the house.

Prices in the area could rise in coming months because the supply of homes for sale in Riverside is down — from nearly 19,000 last year to 13,000 in February.

Many potential buyers are hunting for deals in places that were especially hurt by the housing bust. In Sarasota, Fla., which boasts wide sugar-sand beaches, condos are selling for an average of $325,000, compared with more than $550,000 at the height of the boom, said Marc Rasmussen, a broker.

Homes nearing foreclosure account for nearly half of all properties on the market, according to the Campbell/Inside Mortgage Finance HousingPulse survey. That compares with 10 percent in healthy economies. Many are receiving multiple offers because their prices have plunged.

In Phoenix, a foreclosed home offered for $77,000 that had been vandalized received 21 offers last month at or near the asking price — roughly the price it sold for. The average time a home sits on the market in Phoenix has dropped from 114 days last year to 90 days, according to the Cromford Report, a data research group.

In suburban Washington, D.C., Rory Obletz and his wife have been saving to buy after renting for six years. Obletz, 27, failed in two previous bids for single-family homes. He’s hoping a third bid — about $10,000 above the asking price of $399,000 for a home in Silver Spring, Md. — will succeed this month.

“One home we went to, it was under contract by the time we walked out of the house,” Obletz said. “If you really want to get something, you don’t have a lot of time to think about it.”

It isn’t just bargain-hunting families seeking homes. Investors are increasingly buying single-family houses, fixing them up and re-selling them or converting them into rentals.

Investors are out-bidding many first-time buyers on cheaper homes in particular. Sales of homes between $100,000 and $250,000 have jumped nearly 19 percent over the past year. For homes between $250,000 and $500,000, sales are up 13 percent.

More expensive homes, from $500,000 to $750,000, whose sales tend to contribute the most to the U.S. economy, are up a smaller 6.7 percent.

For buyers seeking to move up to a bigger home or to relocate, the toughest challenge is often selling the home they’re in. According to CoreLogic, about 11 million homeowners are “underwater” — they owe more on their mortgage than their home is worth.

Yet for first-timers like Obletz, who have been saving and watching as homes have become more affordable, the time feels right.

“Rent is a little more expensive, and we have the money, so we might as well jump on it,” he says.


Veiga reported from Los Angeles. Associated Press Writer Tamara Lush in Sarasota, Fla., contributed to this report.

Copyright © 2012 The Associated Press. All rights reserved.

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Fed to keep Interest Rates Low

By Don Lee, Los Angeles Times

March 26, 2012, 10:50 p.m.
ARLINGTON, Va.— — Federal Reserve Chairman Ben S. Bernanke, worried that recent labor market improvements could fizzle because of weak economic growth, signaled that he was poised to keep interest rates at their super-low levels and stick with the central bank’s easy-money policy for some time.

Though the labor market and the economy have improved in recent months, he stressed in a speech Monday that labor-market conditions were “far from normal,” noting that the number of people working is well below pre-recession levels, as is the total number of hours worked.

And he expressed concern about the unusually high number of long-term unemployed, whose skills and ability to get jobs tend to decline over time.

Some financial analysts had been speculating that the central bank might be pondering an increase in interest rates because of a strengthening of the economy. But Bernanke’s comments indicated that he plans to stick with the Fed’s low-interest-rate, easy-money policy for the foreseeable future.

Bernanke noted that the substantial drop in the jobless rate — to 8.3% in the first two months of this year from 9.1% last August — was “somewhat out of sync” with the slow pace of economic activity.

“What we may be seeing now is the flip side of the fear-driven layoffs that occurred during the worst part of the recession,” the Fed chairman said at a gathering of the National Assn. for Business Economics. He said that companies appear to “have become sufficiently confident” to hire more workers to meet expected demand.

But for the jobless rate to drop much further, he said, the nation would need “a more rapid expansion of production and demand from consumers and businesses.” That, he said, argues for “continued accommodative policies” to support growth.

Wall Street cheered Bernanke’s comments, with major indexes locking in gains of more than 1%.

The Dow Jones industrial average rose 160.90, or 1.2%, to 13,241.63. Broader indexes also gained: The Standard & Poor’s 500 jumped 19.40, or 1.4%, to 1,416.51, and the technology-heavy Nasdaq Composite climbed 54.65, or 1.8%, to 3,122.57.

Investors have been buoyed by good economic news, including improvements in the unemployment rate. That has boosted the equities market, with the S&P 500 near its highest point since May 2008 and the Nasdaq rising for six straight weeks.

The Fed has pledged to keep short-term interest rates near zero until at least late 2014. But some policymakers at the central bank have questioned the wisdom of extending monetary stimulus for so long, arguing that it risks setting off inflation.

In Monday’s remarks, “Bernanke made clear that the slack in the labor market is sufficient to sideline the inflation issue for the moment,” Diane Swonk, chief economist at Mesirow Financial, said in a note to clients. “Ben will continue to resist and override dissenters in his own ranks to keep and perhaps even expand monetary policy accommodation.”

Some economists have suggested that the unemployment figure has fallen sharply in part because many discouraged workers have simply dropped out of the labor force.

Bernanke said, however, that “a substantial portion” of the decline in the rate reflects genuine improvement in the labor market.

Some experts also argued that the Fed’s low-interest policy won’t help the labor market much because the main challenges involved structural problems, such as a mismatch between the skill levels of workers and the needs of employers.

But the Fed chairman made clear that he viewed insufficient demand as the main culprit for the weak labor market.

The gist of his conclusion is that “monetary policy can’t solve all the unemployment problems, but it can have a significant impact,” said Lynn Reaser, an economist at Point Loma Nazarene University in San Diego and past president of the business economic group.

If the unemployment problem was mostly structural, she said, the policy solutions wouldn’t be monetary stimulus but things like retraining and education reform.

“If he is indeed correct that [high unemployment] is a cyclical short-term problem and that it can be corrected with continued economic growth, that’s very good news for Americans worried about being trapped in long-term high joblessness,” she said.

Times staff writer Joe Bel Bruno contributed to this report.

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FHA Loans to Become a Little Cheaper

Refinancing Fees Are Reduced for Some F.H.A. Borrowers


In what it described as part of an initiative to lift the housing market, the Obama administration said Tuesday that it would make refinancing less expensive for certain borrowers with mortgages backed by the Federal Housing Administration.

“It’s like another tax cut that will put more money into people’s pockets,” President Obama said at a news conference announcing the plans, adding that he does not need authorization from Congress to make the changes.

The F.H.A. does not make loans, but insures mortgages that meet its guidelines: people with credit scores of 580 or more can put down as little as 3.5 percent. After the housing market collapsed in 2007, the number of mortgages backed by the F.H.A. surged, accounting for 40 percent of all new-purchase mortgages in 2010, up from 4.5 percent in 2005, agency figures show.

The fee reductions will apply only to borrowers seeking to refinance through the agency’s “streamline” program, which is typically less burdensome than a traditional refinancing. There are a few requirements, though the biggest drawback is that only borrowers with loans that were originated on or before May 31, 2009, are eligible. That excludes a lot of borrowers, though the White House estimated that two million to three million mortgage holders would qualify.

In addition, borrowers must have an existing F.H.A. loan that they are seeking to refinance into another F.H.A. loan. They must also be current on their payments, and no more than $500 can be taken as cash out of the loan. But the refinancing does not require any income verification or an appraisal, which means that borrowers who owe more on their mortgage than their house is worth are also eligible.

“This is one way that F.H.A. can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates,” said Carol J. Galante, the housing administration’s acting commissioner. “By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden, which will benefit the housing market and the broader economy in the process.”

The F.H.A. charges two types of fees to borrowers, and they have risen in recent years. That has prevented many borrowers from refinancing into loans with some of the lowest interest rates on record, mortgage brokers said.

Now, under the new initiative, the fee known as the upfront mortgage insurance premium will drop to a mere 0.01 percent of the loan balance from 1 percent. Meanwhile, the annual mortgage insurance premium will be cut by about half — to 0.55 percent of the loan balance from 1.15 percent. Taken together, the administration said, the fee reductions could save the typical F.H.A. borrower about $1,000 a year. That does not include any savings from a lower interest rate.

The changes follow a series of fee increases that the F.H.A. announced last month that are meant to strengthen the agency’s reserves. The higher fees will apply to borrowers taking out new mortgages and people seeking to refinance loans that originated after May 2009.

Moreover, President Obama also announced plans to provide relief for service members and veterans, including those who were wrongfully foreclosed upon or denied a lower interest rate on their mortgage.

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HARP Loans have not hit yet

Mortgage applications decreased 4.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Feb. 17.

The Refinance Index decreased 4.8 percent from the previous week. The seasonally adjusted Purchase Index decreased 2.9 percent from one week earlier. The unadjusted Purchase Index increased 1.4 percent compared with the previous week and was 9.2 percent lower than the same week one year ago.

The four-week moving average for the seasonally adjusted Market Index is down 0.30 percent. The four-week moving average is down 3.21 percent for the seasonally adjusted Purchase Index, while this average is up 0.33 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 80.1 percent of total applications from 81.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.4 percent of total applications from the previous week.

In January 2012, among refinance borrowers, 57.2 percent of applications were for fixed-rate 30-year loans, 24.4 percent for 15-year fixed loans, and 5.5 percent for ARMs. The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 12.9 percent of all refinance applications. The share for 30-year fixed, 15-year fixed and ARM increased from the previous month while the “other” fixed category shares decreased from last month.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.09 percent from 4.08 percent, with points increasing to 0.53 from 0.51 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.32 percent from 4.30 percent, with points decreasing to 0.42 from 0.44 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.87 percent, with points decreasing to 0.41 from 0.78 (including the origination fee) for 80 percent LTV ratio loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.38 percent from 3.33 percent, with points decreasing to 0.37 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.94 percent from 2.93 percent, with points increasing to 0.44 from 0.42 (including the origination fee) for 80 percent LTV ratio loans. The effective rate also increased from last week.

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Arizona’s Piece of the Pie!

Arizonans will divide up about $1.6 billion from a nationwide settlement announced Thursday with five major mortgage lenders.

The cash is part of a $26 billion pact to settle claims that the lenders acted improperly and illegally in dealing with homeowners who sought mortgage relief. The allegations range from refusing to work in good faith with borrowers to outright fraud in offering up documents to courts to foreclose on homes.

Thursday’s settlement came after California and New York finally agreed to become part of the settlement. That left only Oklahoma to deal on its own with the lenders.

But it also was waiting on Arizona Attorney General Tom Horne finally settling a separate lawsuit the state had filed in 2010 against Bank of America alleging various types of fraud.

Horne said Thursday that had to come first, as the national pact absolves the five lenders of any future civil liability. More to the point, if Arizona had signed the national deal first, it would have forfeited any chance of a separate recovery.

As it is, Bank of America has agreed to pay the state another $10 million.

Some of that will go to individuals who were harmed by the bank’s foreclosure activities. And some of that will go to efforts by Horne’s office to prosecute financial fraud.

The biggest chunk of Arizona’s share of the settlement is earmarked to directly help those who are “underwater” with their mortgages, owing more than the property is worth.

Horne said most of that piece has to be used to reduce the principal owed. But he said that does not mean homeowners will find their mortgages reset to current property values and that, even after the help, the outstanding balance may still be more than the home would bring in a sale.

He also could not spell out exactly how much help any one borrower would get, saying each lender will have to set its own standards. That means the banks could do a large number of small-amount reductions or a smaller number of bigger write-downs.

To qualify, though, homeowners have to be current on their mortgages. Horne said it would be irresponsible to reward those who have fallen behind.

“The mere fact that you’re underwater doesn’t mean you shouldn’t continue to make your payments,” he said.

And the funds are specifically set aside for those whose “loan-to-value” ratio is 175 percent, meaning that the amount owed is equal to 1.75 times what the house is worth.

But some of that $1.3 billion also is available for other types of relief.

For example, it could be used to facilitate a “short sale,” allowing the home to be sold when the mortgage balance exceeds the value of the property without ruining the credit rating of the borrower.

Other options include:

• Allowing homeowners who have lost their jobs to skip payments until reemployed.

• Relocation assistance for homeowners facing foreclosure.

• Funding to fix up blighted properties.

The deal also includes another $110 million for those who lost their homes in foreclosure between 2008 and the end of 2011 due to lender misconduct. Horne said he does not know how many are affected but believes the cash payments should work out to about $2,000 apiece.

Horne said that to qualify a former homeowner must allege that they were dealt with unfairly by the lender.

“They won’t have to prove it, but check off a box that they feel they were subject to (loan) servicer abuse,” he said.

Some of the allegations against the banks relate to what Horne said were horror stories of lenders who were double dealing with borrowers.

Horne said one of the biggest problems was when bank officials put borrowers on “trial modifications,” telling them to keep paying, even if it is not the full amount due.

“They abided by everything, they made their (reduced) payments on time, they have done everything they’re supposed to do,” he said. “And then they come home and find there’s a notice they’re being foreclosed on.

In fact, the state’s original lawsuit against Bank of America cited an instance where a homeowner was told to make a payment even after the bank had actually foreclosed on the house but had not yet evicted the owner.

One non-cash provision in the deal requires the lenders to have a single point of contact, one person who has all the information so this kind of thing does not happen. Another has time deadlines for when people need to be told whether their requests for loan modification have been approved or rejected.

There also is $85 million available for interest rate reductions – but not for everyone.

To qualify, a homeowner must have a mortgage with an interest rate of at least 5.25 percent. And here, like the principal reduction relief, nothing in the settlement spells out how low that rate has to go.

But Horne said there are incentives for the lenders to move the rate down low enough so the monthly payment drops by at least $100.

The biggest limit may simply be that the deal only affects those who have mortgages from the five companies: Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial, formerly known as GMAC. Those with mortgages held by others, including Fannie Mae and Freddie Mac, will not share in the settlement.

Horne said he believes the settlement is a good deal.

On the larger level, he said that $26 billion figure – the largest nationwide deal since states settled with tobacco companies decades ago – is “real money.” But he also said it is good for Arizona.

As crafted, Arizona is getting the third largest chunk of the $26 billion settlement, after only California and Florida.

Horne said that is far better than any deal on a population basis. But he said the figure is justified.

“Arizona has suffered more than other states in its mortgage market,” he said.

Anyway, he said there were risks in not joining the national deal.

“A decision to not settle would be based on the assumption that if we litigated, we would recover more,” Horne said.

“But even if we did recover more, there might be a four- or five-year delay while the case is litigated and then appealed,” he continued. “And you have a lot of homeowners who don’t want to get kicked out of their homes who would suffer during those four or five years.”

Potentially riskier is that, after all that time, the state might ultimately get a verdict for less than the $1.3 billion it is getting. “And that would be a terrible result.”

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Where were YOU 8 years ago?

I lifted this from Inman this morning, forget about the movie… are you ready to, or can you… change?

Eight years ago a scrappy kid at Harvard had an idea.

I would have liked to be at Harvard that night; the night that Harvard got hacked. The night that one computer geek had a wild idea that actually worked.

The night the internet changed.

I wonder if he had any idea what he created. I wonder if he knew just how disruptive “The Facebook” would be.

Disrupting Harvard was just the beginning.

Today, I read a number of tech blogs and articles about Facebook’s IPO. Unless you’ve been living under a rock, you may have missed that as of this writing, just a few hours ago, Facebook filed it’s prospectus for an (IPO) initial public offering, seeking $5 billion in funding.

To me, this is fascinating on many levels, here are five I want to share with you today:

1. The Facts and Figures

We finally have insight into just how much Facebook is worth and how much people are to gain once Facebook goes public. Where does Facebook make money?

In 2011, 85% came from advertising. Zynga, the social gaming company accounted for 12% of annual revenues in 2011.

There are 845 million users per month (nearly one sixth of the WORLD is visiting Facebook), 2.7 billion likes and comments/day, 250 million photos are uploaded everyday and 100 billion friendships are started.

2. Mobile is Facebook’s Next Opportunity

425 million people visited Facebook on a mobile device in the month of December 2011 – yet no ads appear on the mobile Facebook app. So HALF of Facebook’s audience is not seeing their number one revenue source!

3. Sponsored Posts in Your Newsfeed?

The S-1 states that the increasing growth of mobile remains a risk for the company until it can successfully monetize the platform, which could include inserting “sponsored posts” into users’ news feeds on mobile devices. Will this be like Twitter’s sponsored tweets? I have a feeling, Facebook could face mutiny from many users if this is laid out.

4. Boy, I’d Like to Be a Realtor in Silicon Valley Right Now

Very soon there will be 3,000 new millionaires in the Silicon Valley. Mark Zuckerberg is only 27 years old and will probably be the youngest billionaire ever.

I live close enough to that area to know how huge that really is. The money and influence Facebook has already had and will continue to have on the market in the Bay Area is monumental. I hope agents in those areas are ready for the influx of money and power that is about to come their way. I hope for any Bay Area agents reading this, they are ready to roll up their sleeves and get ready to work for a huge opportunity – work those contacts, rock out their social media plan, and network like never before. There is a lot of money to be made very soon – and it’s not just from the 3,000 employees. Here is an interesting chart from Gizmodo that shows the wealth that is coming to the founders and employees at Facebook. By they way – do you see Bono on here? Who knew?!

5. The Evolution of Facebook

One of the things that continues to impress me time and time again is how Facebook continues to evolve and improve. They change as the times change. And times are changing FAST.

They aren’t afraid to DISRUPT their business model.

Think about Kodak, and the recent announcement that they were filing for bankruptcy. Why and how did this happen? Because they couldn’t keep up with the times. They were afraid to let go of the film business. Well guess what – times changed and they didn’t keep up.

In a letter from Mark Zuckerberg yesterday, he says “At Facebook, we’re inspired by technologies that have revolutionized how people spread and consume information. We often talk about inventions like the printing press and the television — by simply making communication more efficient, they led a complete transformation of many important parts of society. They gave more people a voice. They encouraged progress. They changed the way society was organized. They brought us closer together.

Today, our society has reached another tipping point. We live at a moment when the majority of people in the world have access to the internet or mobile phones — the raw tools necessary to start sharing what they’re thinking, feeling and doing with whomever they want. Facebook aspires to build the services that give people the power to share and help them once again transform many of our core institutions and industries.”


So will Facebook’s IPO blow any other publicly traded company out of the water? Most likely, but that’s not the big takeaway here.

Eight years ago, when a kid from Harvard was hacking at the college computer network, where were you? What were you doing?

Eight years ago, a lot of us were enjoying the benefits of an incredible market, and thought “man, this is easy money.”

Eight years ago the iPad and the iPhone didn’t exist.

Eight years ago, people were still chatting in chat rooms on AOL and Yahoo – that’s what social networking was in 2004.

My, how times have changed.

How have you changed in the last eight years?

No, we can’t all be millionaires from Facebook – but we sure can capitalize on one of the (if not, the biggest) opportunities we have ever had to change our business.

If you are still someone who doubts the power of Facebook for your business, it’s time to pull your head out of the sand. It’s time to do something disruptive.

It’s time to stop pretending Twitter and Facebook and Google+ and “social networking” are a fad.

What’s ironic, is here in the tech-savvy Bay Area, how many agents I know that still are doing it the “same old, same old” – they are the ones I still hear complaining about how tough it is now, or musing that “they guess they should get on Facebook.”

Stop waiting and get on the train of innovation.

We are living in a time where ANY information you need is literally at your fingertips. Don’t know how to maximize Facebook for your business? Start here, on Inman Next and do a search for “Facebook” – then go to Google. Then, YouTube. Then come to one of our events like Agent Reboot or Connect, and learn from the very best on what to do.

I realize this may sound a bit harsh – and maybe disruptive, but I wouldn’t be doing my job, if I didn’t tell each and every real estate professional reading this – that it is time to jump aboard.

Do not be left behind. It is no longer an option to NOT be on sites like Facebook and Twitter and to have a strategy to propel you into the next eight years…. and beyond!

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