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Foreclosure Crisis and Double Dip Housing, is Anyone Surprised?

October 26th, 2010 by Bill Collins Leave a reply »

Double Dip in Housing: Has it Clearly Arrived?

On October 22nd, Clear Capital, a California based provider of real estate data and an appraisal management company familiar to many of our readers, issued a press release which reported that their Home Data Index showed a drop of almost 6% during the past two months.  Clear Capital called this a “special alert” and stated that: “This significant drop in prices, in advance of the typical winter housing market slowdowns, paints an ominous picture that will likely show up in other home data indices in the coming months”.  This report has since gained substantial media attention, including a CNBC video which included commentary by Diane Olick of CNBC and Kevin Marshall of Clear Capital.  Links to the Clear Capital press release and the CNBC video are found here:

Newsroom at Clear Capital : Press Release

Emergency Alert on Home Prices

Clear Capital noted that there have been fairly close correlations between their index and the S&P/Case-Shiller index which is coming out later this morning.

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National Association of Realtors Proclaim Recovery Has Begun

Yesterday, the NAR reported a significant gain in home sales in September and Lawrence Yun, chief economist for the NAR, suggested that a sales recovery has begun.  Mr. Yun is quoted as having said that . “A housing recovery is taking place but will be choppy at times depending on the duration and impact of a foreclosure moratorium. But the overall direction should be a gradual rising trend in home sales with buyers responding to historically low mortgage interest rates and very favorable affordability conditions”.  Before we get too excited about Mr. Yun’s statement, it might be important to review the overall report, which also indicated that the September 2010 sales were 19.1% below the figures from September 2009.

Would you buy a used car-or a used home-from this man?

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The Foreclosure Crisis: Beginning of Another Meltdown?

On Sunday, Eric Dash writing in the New York Times attempted to provide an overview of the foreclosure crisis.  He asked the question of who is really to blame and provided this answer:

“The foreclosure system, which became like Lucy and Ethel, overwhelmed at the chocolate factory.  As millions of homeowners fell behind on their mortgage payments, the banks were overwhelmed. Their loan collection operations were designed to process regular payments, not handle the specialized needs of troubled borrowers.

Computer systems were outmoded; the staff lacked the training and numbers to respond properly to the flood of calls. Traditional checks and balances on documentation slipped away as filing systems went electronic, and mortgages were packaged into bonds at a relentless pace. To make matters worse, many tasks were outsourced, with little oversight by the banks or their federal regulators”.

Bloomberg Businessweek reported on October 21st that the foreclosure crisis involved much more than faulty documentation, saying that “It’s about trust—and a clash over who gets stuck with $1.1 trillion in losses”.

Another interesting report by Richard Eskow in the Huffington Post on Sunday “MERS”, the “database-driven entity created by the mortgage industry”, how it operates and who owns it.

Links to these reports are found here:

Foreclosures: A Paperwork Fiasco – New York Times

Mortgage Mess: Shredding the Dream – Bloomberg Businessweek

Pictures of MERS, Part 1: Corporate Documents Illustrate the Mortgage Shell Game

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Time to Stop Pretending and Acknowledge the Crisis

In his new book Crisis Economics: A Crash Course in the Future of Finance, Nouriel Roubini (noted professor of economics at New York University’s Stern School of Business, founder of the economic and consulting firm RGE Monitor and former  policy advisor to the White House and Treasury Department) discusses how so many people in the financial community and the political establishment basically said “Who could have known?” in failing to foresee the housing, finance and economic collapse of 2008.  He points out former Vice President Dick Cheney’s statement in January 2009 that: “Nobody was smart enough to figure (it) out…I don’t think anybody saw it coming.”

Nouriel Roubini, along with co-author Stephen Mihm, make the opposite point in saying that the housing, finance and economic crises were both probable and predictable.  The authors compare previous crises with the current one.  They cite President Herbert Hoover’s statement in May of 1930 that “…I am convinced we have now passed through the worst—and with continued unity of effort we shall rapidly recover.”  The authors then quote Treasury Secretary Henry Paulson’s statement in May of 2008 that “The worst is likely to be behind us…we are closer to the end of the market turmoil than the beginning”. Roubini and Mihm state that:

“Both Hoover and Paulson were making the classic error of those caught in a financial hurricane, mistaking the eye of the storm for the end of the crisis…Unfortunately, financial crises usually ebb and flow in their severity; they rarely hit once and then subside. They resemble hurricanes in that they gather strength, weaken for a while, and then gain even more destructive power than before. This reflects the fact that the vulnerabilities that build up in advance of a major crisis are pervasive and systemic. They cannot be cured by the collapse or bailout of a single bank, or even the implosion of an entire swath of the financial sector.”

During this past week, HUD Secretary Shaun Donovan and Treasury Assistant Secretary Michael Barr sought to quiet concerns about the foreclosure crisis with statements that their review has “…not found any evidence at this point of systemic issues in the underlying legal or other documents…” (Shaun Donovan) and that there was no threat to “…the “safety and soundness of the financial system.” (Michael Barr).  Secretary Donovan, in an interview, went one step further in statements that he made about the housing market showing significant signs of improvement.

In Crisis Economics, Roubini and Mihm write in regard to Hoover and Paulson that “Interestingly, this kind of optimism is usually genuine; it’s not an attempt to jawbone markets but generally reflects a real belief that the storm has passed.” In regard to Secretary Donovan’s remarks, we recognize that it is an election year and it may be an attempt to “jawbone markets”.

Secretary Donovan is well meaning and hard working but I am fearful that he may be re-evaluating these statements in the near future.

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Rates and Dates

Freddie Mac reported that rates for 30-year fixed-rate mortgages rose slightly to 4.21% for the week ending October 21st, up from the 4.19% rate reported on October 14th.

The Mortgage Bankers Association (MBA) in its most recent Weekly Mortgage Applications Survey for the week ending October 15th reported a decline to 4.21% from the previous week’s average of 4.34%.

Additional information from Freddie Mac can be found by going to: Weekly Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

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Appraiser News is always a FREE publication. Please support our sponsors by clicking here.

Appraiser Help is happy to announce it has renewed its partnership with McKissock 100% Education to provide generous discounts on Continuing Education courses for Appraisers. Go to Discounted McKissock Continuing Education to start saving today and to learn more!

Ask Angie

We want to congratulate our most recent winner, Sean M. Genovese, a Certified Residential Appraiser from New Orleans, Louisiana. Sean was the first person who responded correctly that Anton Chekhov was the author of the quote: “Let us learn to appreciate there are times when the trees will be bare, and look forward to the time when we may pick the fruit.”

Today’s questions: Who said,

“If you pretend to be good, the world takes you very seriously. If you pretend to be bad, it doesn’t. Such is he astounding stupidity of optimism.”

a) Oscar Wilde

b) Mark Twain

c) John Lennon

d) Shaun Donovan

e) None of the above

And “The charm of history and its enigmatic lesson consist in the fact that, from age to age, nothing changes and yet everything is completely different.”

a) Nouriel Roubini

b) Stephen Mihm

c) Aldous Huxley

d) Both a) and b)

e) None of the above

The first person to respond with the correct answer wins a choice of either:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies for FHA Appraisers

Angie’s Hall of Fame: Those who have been crowned winners more than once during the past two years and who have been retired from competition for the rest of 2010:

Suzanne Fahien

Pat Reass

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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