Weak housing market weighs on job growth

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Existing ARM loans getting ready to reset...

Mortgage resets: a rude awakening
October 17 2007: Ignorance may be bliss, but it could mean a lot of pain for all the players in the subprime crisis when a record number of adjustable rate mortgages reset.

About $50 billion in adjustable rate mortgages reset this month, driving interest rates up for many borderline borrowers. And despite efforts to raise awareness, it doesn't look like anyone is really prepared for what's to come. "I don't know if there's anything much [borrowers] can do," said Keith Gumbinger of HSH Associates, a publisher of mortgage related information. "Hopefully, they've been prudent about preparing for it, building a nest egg or refinancing the loan."

But most borrowers are likely to just scramble to pay the higher expenses - some of which will jump by 50 percent and come as a big surprise. According to a survey conducted last month for the AFL-CIO by Peter D. Hart Research Associates, three quarters of borrowers have little clue about how much their payments will increase when their loans adjust. Nearly half don't know how their loans actually reset.

"This survey shows that many homeowners simply are not prepared for the steep rise in mortgage payments that this market inflicts on ARM holders," John Sweeney, president of the AFL-CIO, said in a press release. When asked whether they were confident or worried about making their monthly mortgage payments over the next few years, 41 percent of homeowners whose adjustable rate mortgages (ARMs) had already reset said they were worried. Only 18 percent of pre-reset borrowers were concerned.

The record round of resets has been getting a lot of attention across the board. Congress, the Bush administration, government agencies, regulators and community groups and lenders all have their own ideas on how to offer relief. Mark Zandi, chief economist for Moody's Economy.com, believes that borrowers are more informed than in the past, but he doesn't see that knowledge translating into better results. "The success rate for loan modifications is not improving much," said Zandi. "In September, defaults surged."

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Don't Expect a Housing Turnaround Soon
Oct. 17, 2007 - The Mortgage Bankers Association Says Housing Problems Will Linger Until Mid-'08

The housing market likely won't turn around anytime soon, according to the Mortgage Bankers Association, which released its forecast for the 2008 housing market and the economy in general today. The Washington, D.C.-based group predicts that the housing sector will continue to suffer through the middle of next year, then begin start to turn around, but slowly.

Among the highlights:

Home starts (new construction) will hit bottom sometime between April and June of 2008 while sales will hit their low point sometime between July and September of 2008.

"Total existing home sales for 2007 will decline by about 12 percent from 2006 to 5.72 million units." Sales will decline an additional 10 percent in 2008.

"New home sales will decline by 22 percent from 2006 to 819,000 units." In 2008, new home sales will decline an additional 10 percent.

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Records dumped in Atlanta...

Document Dump: 40 Boxes of Ameriquest Mortgage Records Found in Dumpster
October 19, 2007 - Police are investigating how the personal files of 1,200 Ameriquest Mortgage customers turned up in a dumpster at an Atlanta apartment complex.

Police say the 40 boxes of records contain sensitive financial information, including customers' credit histories, bank account information, tax and salary records and social security numbers. Management of the Montego Apartments complex immediately alerted police after the abandoned boxes were discovered last month. Deputy Chief Mike Burrows of the DeKalb County Police Department told the Blotter on ABCNews.com that the documents would have been a treasure trove to identity theft criminals. According to Burrows, "If anyone finds it, they can delve into the files and assume people's identity and obviously open credit accounts and obtain loans on vehicles, mortgages -- the general financial identity fraud situation that the whole country's facing."

The police are now trying to get to the bottom of how the files ended up in the dumpster. According to Burrows, the three Ameriquest offices in the Atlanta area closed in 2005, and none were in the immediate vicinity of the apartment complex. Police say the case files involved mortgage customers from a number of different states, including Georgia, Florida and Mississippi. Authorities plan to alert customers identified from the documents so that they can check their records to confirm they were not fraud victims. An Ameriquest representative has reviewed some of the documents, and spokesman Chris Orlando says the company believes they were stolen from Ameriquest in late 2002.

According to Orlando, "We take the security of our records very seriously...and have been working to locate the person or persons responsible for the theft. We are pleased that the files have now been secured by authorities in DeKalb County, and we are working with local law enforcement to determine what information is contained in the files and who stole them." Deputy Chief Burrows says so far his department has uncovered no evidence that the files were stolen from Ameriquest. As previously reported on ABC News, Ameriquest is facing a class-action lawsuit alleging the company misled and defrauded borrowers. Without admitting wrongdoing, the company agreed in 2006 to pay $325 million to settle a similar case brought by 49 state attorneys general.

The Blotter: Document Dump: 40 Boxes of Ameriquest Mortgage Records Found in Dumpster

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Back to basics?...

Subprime Bailout: Taxpayer toll
October 22 2007: Those who oppose mortgage bailout proposals say the cost of helping troubled borrowers and lenders will come out of their pockets. But that's not always the case.

Lend a hand to distressed homeowners? No way, say many, who worry the tab will come out of their pockets as taxpayers. Some proposals, it's true, would be directly financed by taxes. For example, the Senate voted in favor of an appropriations bill that earmarks $100 million to provide housing counseling for those facing foreclosure.

Ohio and Massachusetts are using taxpayer money in those states to help troubled subprime borrowers make mortgage payments or restructure their loans. But some proposals would cost taxpayers money only in a worst-case scenario. Taxpayer dollars, for instance, don't directly support the Federal Housing Administration's loan insurance program - the premiums paid by homeowners with FHA loans do.

But moves to liberalize FHA loan guidelines concern some because the government would presumably step in if the FHA stumbles after taking too much risk. In the wake of the credit crunch, the agency instituted FHASecure to loosen guidelines to make more FHA loans available to homeowners in trouble. A modernization bill under consideration would allow the agency to insure bigger loans and loans with 0 percent down.

Those provisions would expose the FHA to more expensive and more risky loans. If too many of those loans fail, the thinking goes, the government would step in with taxpayer money. "While the subprime market has witnessed considerable stress, the losses in that market are being borne by investors. Were these same losses to occur in FHA programs, it is likely they would be borne by the taxpayer," said Richard Shelby (R-AL), ranking member on the Senate Banking Committee, in a July hearing.

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Granny says, "Sue their socks off!"...

Bill Allowing Mortgage Lawsuits Expected to Stir Fierce Opposition
Oct. 22, 2007 - House Democrats introduced legislation on Monday that would for the first time let homeowners sue Wall Street firms for relief from mortgages that the borrowers never had a realistic chance of repaying.

The measure, which is expected to generate intense opposition from the financial services industry, addresses some of the problems tied to the transformation of the mortgage lending industry from an often local business into a trillion-dollar global market for investors in search of higher returns. The bill is part of a broader measure intended to restrict what lawmakers and consumer advocates consider deceptive and improper lending practices, many of which were common among the millions of soured subprime mortgages to people with low incomes or poor credit histories.

Critics warn that the bill could chill and perhaps freeze a huge source of capital that has helped push homeownership in the United States to its highest level. The legislation, introduced by Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, would require any mortgage lender to verify that the borrower has a “reasonable ability to repay” based on documented income, credit history and debt level.

“The people who package mortgages and sell them into the secondary market were a major cause of the single biggest world financial crisis since the Asian crisis” of 1997-8, Mr. Frank said, “and it’s unthinkable that we would leave that undisturbed.” The congressman said that he expected his committee to debate and approve the measure next week, and that House leaders hope to bring it up on the floor in three or four weeks. Senator Christopher J. Dodd, chairman of the banking committee there, has outlined a separate bill against predatory lending.

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Will Countrywide take the rest of the nation down the tubes with it?...

Staring into Countrywide's abyss
October 23 2007: Giant mortgage lender's third-quarter results will offer a view into the depth of the problems facing lenders, housing industry and the economy as a whole.

Everyone knows the mortgage market has been very bad for the last few months. On Friday, when Countrywide Financial reports its third quarter earnings, Wall Street and economists will get their best look yet at just how bad. Countrywide Financial, for years the nation's leader in just about every type of housing loan available, is a proxy for the nation's housing crisis. Its report, which could have important ramifications for the nation's financial sector, will offer a window on the depths of the real estate and home-building downturn.

Analysts surveyed by earnings tracker First Call forecast that the company will report a loss of $1.26 a share - a dramatic turn from the $1.03 per share profit it made a year earlier. Loss estimates range as high as $3.47 a share. The company has already disclosed some of the bad news. It will take a charge of between $125 million and $150 million in order to cut staff and close offices as it scales back the business. The number of mortgage loans and their value during the quarter are both down by more that 40 percent.

Countrywide, while a leading indicator of the housing slump, clearly isn't the only financial company reporting problems in the period. Within the last week, Bank of America, the nation's No. 2 bank, reported that net income fell 32 percent. It set aside an additional $865 million for credit losses and announced a nearly $1 billion increase in loans that have gone bad. In addition, Washington Mutual, the nation's largest thrift, reported a steeper-than-expected decline in earnings and warned that it is bracing for more difficulties ahead in the housing market.

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AMT: If Congress waits, refunds to be delayed
October 23 2007: IRS says Congress needs to act fast on AMT measures or else tens of millions of taxpayers will face processing delays.

If lawmakers want to protect tens of millions of taxpayers from the Alternative Minimum Tax, they'd best make it snappy. If Congress does not act in the next two weeks or so, 25 million to 50 million taxpayers will see the processing of their returns and their refunds delayed, the IRS said Tuesday. In a press briefing, IRS Acting Commissioner Linda E. Stiff said that it will take the IRS between 12 and 13 weeks to process any AMT-related tax law changes from the day the bill is signed into law.

Currently, the IRS is scheduled to send its 1040 instruction forms to press on Nov. 7 and will mail them out the first week in January, said IRS spokesman Terry Lemons. The agency will begin processing 2007 tax returns on Jan. 14. If lawmakers wait until December to make changes to the AMT, the IRS would not be able to start processing the 25 million to 50 million affected returns before mid- to late-March.

December tax law changes are not unprecedented. That's how long Congress waited last year to extend certain tax breaks. But those tax-break extensions only affected the programming and printing of a few IRS forms and resulted in a roughly two-week delay for no more than 4 million returns, Stiff said. By contrast, she said, "AMT is at the core of our processing system. We'll have to reprogram millions of lines of code and test it."

Typically, taxpayers who expect refunds tend to file earlier than others. For tax year 2006, 103 million filers out of 135 million got refunds averaging $2,259. The AMT was originally intended for the wealthy few when it was created nearly 40 years ago. But because Congress never indexed for inflation the amount of income exempt from AMT and because it disallows a lot of popular tax breaks, tens of millions of middle-class taxpayers could get hit.

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Gonna get worse `for it gets better...

Home builders: Worst is yet to come
October 24 2007: Economists offer dour outlook for housing prices and construction, citing continuing credit crisis - weakness is likely to persist into 2009.

The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders. The economists agreed that the problems with home finance markets will continue to hit housing into next year, and that even when there is a recovery, it will be a slow process that will see weakness continue into 2009.

While most said they believed the overall U.S. economy can weather the housing downturn, several saw significant risk of a recession. Mark Zandi, chief economist of Moody's Economy.com, said that large areas of the country will fall into recession, if they haven't done so already. The economists also admitted to being surprised by how bad the housing downturn has become, and all said that making forecasts of a recovery is difficult due to the problems in the credit markets.

"This time, we just don't know how it's going to pan out because the securities markets have become so much more important," said David Seiders, chief economist with the builder's trade group. The conference was held in Washington, D.C., on Wednesday, as another trade group, the National Association of Realtors, was reporting the lowest pace of existing home sales since it started using current measures to track those sales since 1999. The sales of existing home sales slowed to the slowest pace since 1998, while the supply of homes on the market rose to its highest level in 12 years.

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Existing home sales plunged in September
Oct 24, 2007 WASHINGTON - Record 8 percent decline puts further pressure on house prices

Sales of existing homes plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years. The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.

The weakness in sales translated into further pressure on prices. The median price — the point at which half the homes sold for more and half for less — fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased. The 8 percent decline in sales was bigger than the 4.5 percent decline that had been expected.

Analysts blamed the bigger-than-expected slump on the turmoil that hit credit markets and mortgage markets in August as worries increased over rising mortgage foreclosures. Those worries resulted in a drying up of the availability of so-called jumbo mortgages, loans over $417,000, which are particularly important in high-cost areas such as California.

More Existing home sales plunged in September - Real Estate - MSNBC.com

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Countrywide offerin' to help clean up its mess...

Countrywide joins foe to help borrowers
October 25 2007: The mortgage lender and a long-time adversary claim they can change foreclosure prevention with a new bailout program.

It's an unlikely pairing: the nation's biggest mortgage lender and one of its harshest critics. But with thousands of troubled borrowers facing foreclosure, the two adversaries put aside some of their differences and joined forces. Countrywide Finance, announced it's partnering with the Neighborhood Assistance Corporation of America (NACA), a gadfly/community advocacy group that has been its arch enemy for years.

Even as the two trumpeted the new relationship at a feel-good-fest in Washington Wednesday, NACA's web site continued to be sprinkled with links labeled "Countrywide Victims," "Countrywide Woes" and "Expose Countrywide's Predatory Lending." Now they've come up with a program that Bruce Marks, NACA's CEO, would like to see become the standard in foreclosure prevention.

"A lot of people have been talking about saving people's homes," he said. "Today, we have the solution that can act as a model for saving hundreds of thousands of people's homes." The initiative overlaps with the program announced on Tuesday by Countrywide where it would arrange refinancings, restructurings and rate reductions for adjustable rate mortgage (ARM) borrowers. But the partnership with NACA would apply to all the mortgage lender's clients: prime and subprime, fixed and adjustable.

Marks claimed it changes the lending equation. "There's only one substantial solution," he said. "Looking at what the borrower can afford and reducing the rate or the balance to get to that affordable payment. We are re-underwriting these loans to where people can afford them."

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Surplus of homes inventory should force prices down...

For sale: 2 million empty homes
October 26 2007: Number of vacant homes on the market nationwide equivalent to all homes in Detroit; another sign of weak housing market.

The number of vacant homes for sale rose in the third quarter, according to the latest government reading that casts new harsh light on the weakness of the housing market. The Census Bureau report puts the number of vacant homes for sale at 2.07 million in the period, up about 2 percent from the second quarter, and 7 percent above year ago levels.

The number is down 5 percent from the record high reading reached in the first quarter, though. For purposes of comparison for the current situation, imagine the Detroit metropolitan area, which the Census Bureau estimated had 2.08 million households in its 2000 Census. Now picture virtually every house or condo empty, with a for sale sign in the front yard of every home, from inner-city Detroit to its suburbs, all the way to nearby cities such as Flint and Ann Arbor.

There are always some homes vacant and for sale, even in a booming real estate market. But the combination of overbuilding by home builders in the middle of the decade and problems in mortgage markets this year that made it more difficult for buyers to get the financing they needed to buy a home has swelled the inventory of vacant homes on the market.

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US mortgage firm sees $1.2bn loss
Friday, 26 October 2007, Countrywide has recently readjusted the terms of mortgages

US mortgage giant Countrywide Financial has reported $1.2bn (£584m) in losses during the third quarter. The loss, the first for the firm in 25 years, comes after profits of $647.6m a year earlier. The latest quarter included $2.9bn in credit losses.

But the firm said it was through the worst of the slowdown that has dogged the US housing sector and expected to make a profit in the fourth quarter.

The improved outlook sent shares surging nearly 25% higher. "We view the third quarter as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008," said David Sambol. Countrywide's chief operating officer.

'Trough' BBC NEWS | Business | US mortgage firm sees $1.2bn loss

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Not much help to the housing sector...

Fed cut seen slim help for housing
Tue Oct 30, 2007 - A Federal Reserve interest rate cut this week won't be enough to save the reeling housing sector, overwhelmed by unsold homes.

The ability to access credit in a new age of tighter lending standards has eclipsed affordability worries. A Fed easing "is a little bit like chicken soup: it's certainly not going to hurt," says Nicolas Retsinas, director of the joint center for housing studies at Harvard University in Cambridge, Massachusetts.

"But we think the more significant problem in the housing sector is the inventory. It's not just the affordability of the credit, it's even the access to the credit, which is a question today." The Fed is expected to cut its federal funds rate by 1/4 point to 4-1/2 percent on Wednesday after a surprisingly large 1/2-point cut last month. The move is likely already priced into the debt markets, which are a peg for mortgage rates.

The Fed probably will repeat its September statement that tighter credit conditions could intensify the housing slide and restrain economic growth, Barclays Capital economists say. A credit crisis spawned by mounting defaults and foreclosures caused lenders to rein in years of loose lending, choking off loan access for many potential home buyers. Sales of existing homes plunged in September to the lowest level on record dating to 1999.

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Jacked up home loans...

Cuomo: Subprime loans deliberately inflated
November 1 2007: New York's attorney general accuses First American and Washington Mutual of using appraisers to overstate the value of home loans.

New York Attorney General Andrew Cuomo said Thursday a major real estate appraisal company colluded with the nation's largest savings and loan companies to inflate the values of homes nationwide, contributing to the subprime mortgage crisis. "This is a case we believe is indicative of an industry-wide problem," Cuomo said in a news conference. Cuomo announced the civil lawsuit against eAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual Inc. to use a list of "proven appraisers," who he claims inflated home appraisals.

He also released e-mails that he said show executives were aware they were violating federal regulations. The lawsuit filed in state Supreme Court in Manhattan seeks to stop the practice, recover profits and assess penalties. "These blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market," Cuomo said in a statement. "By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion."

Washington Mutual said Thursday it is suspending its relationship with eAppraiseIT and that it plans to further investigate the situation. "We have absolutely no incentive to have appraisers inflate home values," Washington Mutual said in a release. "We use third-party appraisal companies to make sure that appraisals are objective and accurate."

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