Austin commercial foreclosures up; banks get aggressive

Austin Business Journal – by Francisco Vara-Orta

Date: Thursday, November 11, 2010, 5:13pm CST – Last Modified: Friday, November 12, 2010, 8:11am CST

Read more: Austin commercial foreclosures up; banks get aggressive | Austin Business Journal

Foreclosure postings of commercial real estate in Austin are up 13 percent so far this year compared with the first 11 months of 2009, according to a new report. But the tail end of the year has shown improvement, and as savvy investors pick up some few remaining steals, the market is cautiously optimistic.

From January through November, there were 951 foreclosure postings filed on commercial properties in the Austin metro area, compared with 838 for the same 11-month period last year, according to Foreclosure Listing Service, which tracks such activity throughout Texas.

Addison-based Foreclosure Listing Service’s report included several …

Read more: Austin commercial foreclosures up; banks get aggressive | Austin Business Journal

Fannie Mae asks for $2.5B in new government aid

WASHINGTON (AP) — Government-controlled mortgage buyer Fannie Mae is asking for $2.5 billion in additional federal aid after posting a narrower loss in the third quarter.Fannie Mae also said Friday it was likely that the market disarray and suspension of foreclosures due to big lenders’ problems with flawed documents will have a negative impact on the delinquency rates of its loans, its expenses and foreclosure timelines. However, the company said, “we cannot yet predict the extent of its impact.”

Fannie Mae said Friday it lost $3.46 billion, or 61 cents a share, in the July-September quarter. That takes into account $2.1 billion in dividend payments to the Treasury Department. It compares with a loss of $19.8 billion, or $3.47 a share, in the third quarter of 2009.

The government rescued Washington-based Fannie Mae and sibling company Freddie Mac about two years ago and it estimates that will cost taxpayers up to $259 billion. That’s nearly twice the $133.4 billion Fannie and Freddie are in line to receive from taxpayers so far and would make it the most expensive bailout of the financial crisis.

The $2.5 billion in additional aid that Fannie is asking for compares with a request for $1.5 billion in the second quarter.

Fannie and Freddie together have repaid $16.7 billion as dividends to the Treasury Department.

Fannie’s chief executive said Friday the latest results reflect ongoing efforts to contain losses from the high-risk mortgages it bought from 2005 to 2008 and to build up new, more profitable loan business with tighter lending standards.

McLean, Va.-based Freddie Mac reported Wednesday that it managed a narrower loss of $4.1 billion for the third quarter and asked for an additional $100 million in federal aid — far less than the $1.8 billion it sought in the second quarter.

But neither Fannie nor Freddie are out of the woods yet.

The two mortgage giants have been hit by massive losses on risky mortgages purchased from 2005 through 2008. The companies have tightened their lending standards after those loans started to go bad, and default rates on new loans are far lower.

The housing market, however, remains a huge challenge. High unemployment, tepid economic growth, tight credit and uncertainty about home prices have kept people from buying.

Add to that the uncertainty stemming from allegations that big lenders used flawed foreclosure documents to seize millions of homes, a controversy that could put added scrutiny on Fannie and Freddie and bring fresh losses for them.

Fannie and Freddie used some of the same law firms that are accused of processing foreclosure files with flawed documents. They are revoking thousands of foreclosure cases from one Florida law firm which is under investigation for falsifying documents used to complete foreclosures.

Several major banks have been accused of similar conduct. If the banks can’t resolve their foreclosure problems and are barred from seizing many homes, Fannie and Freddie could absorb huge losses on loans they own or guarantee. That’s because they would no longer be able to recover anything on loans that have gone bad.

Fannie and Freddie buy up home loans from lenders, bundle them together into securities with a guarantee against default and sell them to investors worldwide. They own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion.

Fannie Mae reported its earnings three days after midterm elections in which criticism of the government’s financial bailouts had figured prominently in many races. Fannie and Freddie have many critics, especially among Republican lawmakers whose party gained control of the House in Tuesday’s elections.

Over the next year, lawmakers plan to review the nation’s mortgage-lending system and consider a potential replacement for Fannie and Freddie. The financial overhaul signed by President Barack Obama in July didn’t address that issue, despite protests from Republicans that it was incomplete without such a plan.

An analysis issued Thursday by Standard & Poor’s found the total eventual cost to taxpayers of rescuing Fannie and Freddie and funding new entities to replace them could reach $685 billion.

Stock market woes hit Stowe, Vt., second-home market

By Christine Dugas, USA TODAY

A population of haves and have-nots has created a two-sided housing market in Stowe, Vt., in Lamoille County.Stowe is a New England resort town that attracts affluent vacation home buyers. But the county also has small, rural towns where residents own moderately priced homes.

Home sales started to slide in July of last year, reflecting the economic downturn, says Tom Heney, a real estate agent at Lang McLaughry Spera. But for Stowe, the slide was much steeper.

Stowe has a second-home market that relies on executives from the financial services industry in New York and Boston. Because they’ve been hammered by the stock market collapse, vacation home sales have stalled.

Many second-home owners are putting their houses up for sale.

There are 221 properties for sale in Stowe, up from 179 a year ago, Heney says. Vacation home prices range from $400,000 to more than $1 million.

The problem is not worse because Stowe largely escaped the housing bubble. In part, that stems from Vermont’s strict rules for housing construction, which have prevented excessive building.

If the prices come down enough, buyers may be back, Heney says, because “at some point, Americans do love a bargain.” 

Stowe is still a popular vacation spot: Summers are lush, and in the winter, it’s known as the ski capital of the East.

Countywide, the market is so small that even a minor drop in sales exaggerates the percentage change.

In the first four months of the year, there were four home sales in Lamoille County, vs. 10 in the same period of 2006, says Jeffrey Carr, president of Economic & Policy Resources in Williston, Vt.

The county has a low foreclosure and delinquency rate.

“We’ve been lucky in that regard,” Carr says. “That’s attributable to the fact that our banks are more cautious and prudent lenders.”

Foreclosure crisis spreads from subprime to prime mortgages

By Stephanie Armour, USA TODAY

The pace of prime borrowers going into foreclosure is accelerating, especially in states with mounting unemployment or property values that saw a big run-up during the housing boom.It’s a marked shift from earlier this year, when foreclosures were driven by defaults on subprime loans. And it has major implications — ravaging the credit scores of borrowers who once had unblemished records and dragging down property values in more affluent neighborhoods.

It also threatens to undermine the housing recovery.

“It’s definitely a concern,” says Brian Bethune at IHS Global Insight. “(Unemployment) is a major driver of foreclosures, and it will frustrate the housing recovery process.”

In the first quarter, almost half of the overall increase in the start of foreclosures was due to the increase in prime, fixed-rate loans, according to the Mortgage Bankers Association (MBA). At the end of the fourth quarter, 2.4% of prime mortgages were seriously delinquent, more than double the 1.1% at the end of March 2008, according to a report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

“In the beginning, the higher-end (homes) were a bit isolated,” says Kevin Marshall, president of Clear Capital, a provider of real estate asset valuation. “But in the last several months, we’re seeing a significant erosion in the higher-end homes. It’s reached into the prime loans.”

California, Florida, Arizona and Nevada represent 56% of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts, according to the MBA.

That coincides with states reporting some of the highest unemployment rates. In California, the unemployment rate in April was 11%, according to the Department of Labor. In Nevada, it was 10.6%.

Economists fear that further increases in unemployment could lead to more defaults on prime, fixed-rate loans.

That’s what happened to Marvin Clayton, 47, of Waco, Texas. He lost income after his wife had a stroke and was unable to work. Then he lost his job a year ago. He’s now behind on his 30-year, 5.78% prime loan and is facing foreclosure in July. He is currently trying to get another job in retailing.

“I was trying to make it off one income but was struggling to make payments,” Clayton says. “I’m still hoping for a modification from my bank.”

Mortgage rates rise to 6-month high above 5%

By Stephanie Armour, USA TODAY

Mortgage rates have risen to their highest levels in six months, threatening to delay a housing turnaround by discouraging potential home buyers.The average rate on a 30-year, fixed-rate home loan climbed to 5.29% for the week ended Thursday, Freddie Mac reported. That’s the highest since December and up from 4.91% a week earlier.

In early and late April, the rate was at a record low: 4.78%.

“There’s a real risk interest rates could climb up beyond 6% or 6.5%, which can immediately shut down the housing recovery and undermine the national economy,” says Bernard Baumohl, chief global economist at the Economic Outlook Group. “That’s the big battle to watch in the next couple of months.”

Higher mortgage rates are already having an impact. Applications to buy a home or refinance a mortgage tumbled 16% in the week ended May 29 compared with a week earlier, the Mortgage Bankers Association reported this week. Refinancing activity fell 24%. The MBA’s purchase index rose 4.3%.

Refinancings’ share of mortgage activity dropped to 62.4% of total applications from 69.3% the previous week.

While the Federal Reserve is trying to hold down mortgage rates by buying mortgage-backed securities and Treasury securities, other factors are driving up rates.

Mortgage rates have been pushed up by recent increases in yields on long-term Treasury securities, a benchmark for mortgage rates.

If interest rates rise more, that could make a purchase too expensive for some buyers. Weakened demand would delay the reduction of a high inventory of unsold homes, which is considered essential for the market’s recovery.

Some economists say the fundamental building blocks of a housing recovery are already in place and that rising interest rates will not derail the process.

“(Higher interest rates) could slow down refinancing, but the housing recovery is going to be one that takes time, and we’ll see setbacks on the way,” says Michael Darda, chief economist at MKM Partners. “I don’t think the housing market recovery is going to be derailed.”

Lawrence Yun, chief economist at the National Association of Realtors, say rising interest rates often have a short-term effect of driving more buyers into the market. Those buyers rush to buy so they can lock in rates before they go still higher.

But that impact is short lived.

“Further rises will impact buyers. That’s a risk,” Yun says. “Mortgage rates have been the lifeblood of the market.”

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