NEW YORK – Feb. 20, 2012 – Lenders are allowing more short sales by financially strapped homeowners and a few people are even getting cash to complete the sale.Short sales have been increasing for months, but the financial incentives – which Realtors say are random and infrequent – are a newer wrinkle.Examples:• JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.• Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if they should be expanded to more states. The Florida program began last fall, spokesman Richard Simon says.• Wells Fargo’s incentive offers range from less than $3,000 to $20,000, spokesman James Hines says.Short sales, even with incentive payments to borrowers, can save lenders money compared with the expenses involved in completing foreclosures. In states such as Florida where foreclosures go through the courts, 50 percent of loans in foreclosure are more than two years past due, says a January report by mortgage tracker LPS Applied Analytics.“It’s a lot cheaper to shell out $10,000 or $20,000 to someone than it is to go through a long foreclosure,” says Jim Gillespie, chief executive of Coldwell Banker.Banks are more willing to do short sales now than in the past, Gillespie says. Cash incentives appear to be “limited but increasing” in number, he adds.“When a loan modification isn’t possible, a short sale may be a better and faster solution” than foreclosure, says JPMorgan Chase spokesman Thomas Kelly.The lenders won’t say how often they extend such incentives.“If you have two similar sellers, one might get it and another may not,” says Colleen Badagliacco of Altera Real Estate in San Jose. “It’s very random.”Typically, short sale incentives are more common for loans in states where foreclosures take more time, Hines says.In November, short sales accounted for more than 9 percent of single family home sales and were up 32 percent from the year before, according to CoreLogic.Market researcher Dataquick also shows short sales increasing from January 2011 through last month throughout California and in Phoenix, Miami and Seattle.The federal government-run foreclosure prevention program also offers short sale incentives, at least $3,000 for sellers, but far more short sales are being done outside the government program.“The trend is up,” says Moody’s Investors Service analyst William Fricke.© Copyright 2012 USA TODAY, a division of Gannett Co. Inc.
WASHINGTON – Jan. 25, 2012 – President Barack Obama proposed a new program during his State of the Union address Tuesday to allow homeowners with privately held mortgages to refinance at lower interest rates.The program would cover both loans issued by government-controlled mortgage giants Fannie Mae and Freddie Mac and private mortgage lenders. Congress would have to approve it, a difficult hurdle.“There’s never been a better time to build, especially since the construction industry was one of the hardest-hit when the housing bubble burst,” Obama said. “Of course, construction workers weren’t the only ones hurt. So were millions of innocent Americans who’ve seen their home values decline. And while government can’t fix the problem on its own, responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief.”A punctured housing bubble was at the center of the recession, prompting widespread foreclosures and leaving millions of homeowners with houses valued at less than their mortgages.Under the plan, any homeowner current on his or her mortgage could take advantage of historically low lending rates. Mortgage rates have been below 4 percent for months.A small fee on large banks would pay for the program, senior administration officials said.Administration officials offered few details but estimated savings at $3,000 a year for average borrowers. It’s likely that millions of homeowners would be eligible, but they would have to seek out refinancing options under the program with their lender. Other government programs allow lenders to seek out potential applicants.Further details of the program will likely be released in legislation in the next few days, officials said.The new program would expand the Obama administration’s Home Affordable Refinance Program, which allows borrowers with Fannie and Freddie-backed loans to refinance at lower rates. Few people have signed up for that program. Many “underwater” borrowers – those who owe more than their homes are worth – couldn’t qualify.About 1 in 4 Americans with a mortgage – about 11 million – are underwater, according to CoreLogic, a real estate data firm. Roughly 1 million homeowners have refinanced through the refinancing program. Government officials had estimated it would help 4 million to 5 million homeowners.About half of all U.S. mortgages – about 30 million home loans – are owned by non-government lenders.A task force on mortgage misdeedsPresident Obama also announced the creation of a task force aimed at investigating the shoddy mortgage-lending practices that contributed to the financial collapse of 2008 and the housing crisis that continues to weigh on the economy.Obama said he has asked Attorney General Eric H. Holder Jr. to create a special unit of state attorneys general and federal prosecutors to probe deeper into questionable lending practices and the way in which risky loans were packaged and sold to investors.“This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his State of the Union speech.The creation of the task force comes as the administration and a coalition of state attorneys general are pushing to finalize a long-awaited multibillion-dollar settlement with the nation’s largest banks over their flawed and fraudulent foreclosure practices.The deal has drawn criticism from liberal and consumer groups as well as attorneys general from New York, Delaware and other states, who have insisted that more extensive investigations are warranted and that any settlement should not grant banks too broad a liability from future legal action.Copyright © 2012 The Associated Press. All rights reserved. And Copyright © 2012 washingtonpost.com, Brady Dennis
WASHINGTON – Jan. 25, 2012 – Cash buyers are sending home values down much lower than they otherwise would be, suggests a new survey by Campbell Inside Mortgage Finance, which polled more than 2,500 real estate agents nationwide.In its December Housing Pulse Tracking Survey, the company found that investors accounted for one out of three real estate transactions last month, and about 74 percent of those purchases by investors were made using all cash.“Investors have an over-sized command on the market since their ability to pay cash in the majority of transactions puts undue downward pressure on home prices,” an article at Housing Predictor notes about the study.Cash buyers can be attractive to home sellers, banks and mortgage companies, since they do not usually come with contingencies, require extra time to secure financing, and tend to move more quickly to closing. As such, cash buyers tend to make purchases at lower prices than those who may need financing or come with contingencies.Source: “Cash Buyers Pushing Home Prices Lower,” Housing Predictor (Jan. 24, 2012)© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688
MIAMI (AP) – Aug. 8, 2011 – Offshore investors are flocking to Florida’s distressed real estate prices as major companies with ties to Hong Kong, Spain, Argentina and Malaysia are snapping up properties sensing the local market has bottomed.International companies can park their investment and position themselves for the next development cycle, said Tere Blanca, president and chief executive officer of Miami-based Blanca Commercial Real Estate.“Acquiring prime properties at discount prices in the height of the market was not achievable. Whomever has deep liquidity and can be nimble and act when opportunities arise can acquire properties at what we consider to be solid pricing,” he said, according to the Daily Business Review.Stephan Gietl of Austria and his partner Fernando Levy-Hara, of Argentina, have purchased 307 South Florida condo units for $40 million since 2009. The duo has sold most of the units, mainly to international investors. Levy-Hara says the units yield between 5 and 6 percent profit per year after maintenance fees and property taxes.“With the potential appreciation, if you’re buying at half the price of the bubble, you have the potential to go up 60 to 70 percent in the next five years,” he said.As Americans worry about the economy and debt ceiling, international investors still perceive the U.S. as “the most reliable country in the world,” said Andrew Hellinger, chief executive of Coral Gables-based Hellinger & Penabad.“We are a country where you can place your money for investment and know it’s safe.”South Florida’s most notable recent deals have ties to investors with connections to major international companies.Swire Properties, part of Hong Kong-based real estate and airline owner Swire Pacific, bought 2.15 acres in Miami at $14 million, along with the $13.1 million acquisition of Eastern Bank’s headquarters.In May, Malaysia-based Genting Group paid $236 million for the Miami Herald’s headquarters. Genting, which also owns 50 percent of Norwegian Cruise Lines, plans to build nearly 7 million square feet of hotel, convention and restaurant space. Genting executives cited Florida’s growing population, budding Miami tourism and a likely nonstop flight from Asia to Miami International Airport as motivating the deal.Agave Holdings, with ties to the owner of Jose Cuervo tequila, paid First Bank Puerto Rico $30.55 million for a project in Coral Gables.Espacio USA, the American arm of Spanish real estate company Inmobiliaria Espacio, is about to close on its second office building. The company paid $31.52 million for another office building last year, with renovations running more than $1 million.Brazilians have led the Miami condo market resurgence, accounting for 9 percent of unit purchases among international buyers of Miami single-family homes and condos, according to the Miami Association of Realtors.“The feeling in Brazil is certain aspects of their real estate and economy make U.S. real property a relative bargain,” said Richard Goldstein, of Bilzin Sumberg. “In other countries like Venezuela, the currency is not as much of a factor. Political instability is a factor; they want a safe haven for their money.”Copyright © 2011 The Associated Press. Information from: Daily Business Review, http://www.dailybusinessreview.com
WASHINGTON (AP) – Aug. 8 2011 – Standard & Poor’s Ratings Services on Monday downgraded the credit ratings of Fannie Mae and Freddie Mac and other agencies linked to long-term U.S. debt.The agency also lowered the ratings for: farm lenders; long-term U.S. government-backed debt issued by 32 banks and credit unions; and three major clearinghouses, which are used to execute trades of stocks, bonds and options.All the downgrades were from AAA to AA+, reflecting the same downgrade S&P made of long-term U.S. government debt on Friday.S&P said the agencies and banks all have debt that is exposed to economic volatility and a further downgrade of long-term U.S. debt. Their creditworthiness hinges on the U.S. government’s ability to pay its own creditors.Stocks plunged further after the downgrades. The Dow Jones industrial average fell more than 300 points, or 2.8 percent. The S&P 500 stock index tumbled 3.4 percent. Investors seeking safety drove gold prices up and Treasury yields down.Monday’s downgrades of the mortgage giants Fannie and Freddie reflected their “direct reliance” on the U.S. government, S&P said.Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. As part of a nationalized system, they account for nearly all new mortgage loans. Their downgrade might force anyone looking to buy a home to pay higher mortgage rates.Officials at Standard & Poor’s say they will also indicate shortly how local and state governments will be affected by their decision to lower the long-term U.S. debt.S&P on Friday said it downgraded U.S. debt for the first time in history because the credit rating agency lacks confidence that political leaders will make the choices needed to avert a long-term fiscal crisis.The downgrade of long-term debt issued by the U.S. government affects the banking and lending industries because many interest rates are pegged to the yields on Treasury securities. In addition, many companies use the securities as collateral that they would surrender if their bets lost value.The lower credit rating for long-term U.S. debt means that it might be considered less valuable for those purposes. It might become more costly for companies to borrow or trade.Some analysts said the downgrades were unlikely to have much effect on the companies named by S&P or the broader markets. They noted that Treasury yields remain low and the dollar is getting stronger – signs that the world still sees the U.S. as a safe harbor in volatile economic times.The downgrades “are as meaningless as the original action,” said Daniel Alpert, managing partner at the investment bank Westwood Capital LLC in New York. He said that investors are rushing into Treasurys, and that they will do the same for “anything backed by the full faith and credit” of the U.S. government. That includes debt issued by Fannie and Freddie and bank debt that was guaranteed by regulators to ease lending after the 2008 financial crisis.The yield on the benchmark 10-year Treasury note fell to 2.38 percent from 2.57 percent late Friday. Analysts say traders are shifting out of bonds and European banks are snapping up U.S. debt to steel themselves for a regional financial crisis.S&P Managing Director John Chambers said that the credit rating agency believes the dollar won’t be weakened “under any plausible scenario.” He said it will remain the dominant international currency, and that will reduce interest rates for governments and the private sector.Ten of the country’s 12 Federal Home Loan Banks also were downgraded from AAA to AA+. The banks of Chicago and Seattle had already been downgraded earlier to AA+.A spokesman for Freddie Mac declined to comment on the move.Copyright © 2011 The Associated Press; Daniel Wagner, AP economics writer, and Martin Crutsinger, AP economics writer. AP Business Writer Derek Kravitz contributed to this report.
WASHINGTON – Aug. 8, 2011 – Is the economy heading toward a double-dip recession?Economists say it’s difficult to tell whether a second recession is on the way, so soon after the last one officially turned into a weak recovery two years ago. For every sign pointing to a slowdown, another indicates a pickup.Recent economic reports have shown weakness in everything from manufacturing to consumer spending. The government recently revised its estimate of gross domestic product growth for the first quarter down to a meager annual rate of 0.4 percent. In the second quarter, the GDP growth rate was just 1.3 percent.Other indicators, such as corporate earnings, are at their strongest levels in years.Thursday’s 513-point plunge by the Dow Jones industrial average, its largest decline since late 2008, sparked concerns that the economy is heading off a cliff, because stocks are often seen as an indicator of future growth.Signs of economic weakness, the game of chicken with the U.S. debt ceiling that played out in Washington, D.C., and the spreading debt crisis in Europe have unnerved investors. Standard & Poor’s downgrading of the U.S.’ credit rating, announced late Friday, may heighten worries.But Friday’s employment report, which showed that the economy added a better-than-expected 117,000 jobs in July, helped ease concerns that another recession is around the corner. In response, the Dow posted a mild gain. In keeping with the mixed signals investors are getting, other indexes, such as the Nasdaq composite, declined.Tuesday, the Federal Reserve’s policy committee will meet in Washington to determine how to respond to the latest twists and turns in the economy. Few expect the central bank to announce new plans to stimulate growth, but investors will keep a keen eye out for any hints that such plans are under consideration.There’s little question that the odds that the economy is heading toward a contraction are on the rise. John Lonski, chief economist at Moody’s Investors Service in New York, put the chance of a recession at 40 percent, up from just 20 percent a month ago.His reason: the steep decline in the stock market, which can hurt consumer spending. In the recovery from the 18-month recession that ended in June 2009, rising stock prices have helped make consumers feel better off, even as many saw the prices of their homes decline.Now, home prices remain in a ditch and stocks are taking a beating.“What the U.S. can ill afford is the decline in equity prices in view of how home prices have continued to fall,” says Lonski. “It will reduce household wealth.”The debt troubles in Europe are also a major concern for the U.S., because a collapse in Europe would hurt demand for U.S. goods and wreak collateral damage on the financial sector, which holds a substantial amount of European government and corporate bonds.The last time the U.S. economy experienced a double-dip recession was in the early 1980s, when high inflation and interest rates sapped corporate profits and emptied consumer pocketbooks. Starting in early 1983, the economy came roaring back, sparking a powerful bull market in stocks that didn’t stop until the dot-com bust of 2000 and 2001.The time period between the early-1980s recessions was 12 months, according to the National Bureau of Economic Research, which tracks recessions. Since the most recent recession officially ended more than two years ago, in June 2009, economists may quibble over whether another downturn qualifies as a technical “double dip.” For many Americans, however, it seems as if the recession has never ended – which is why some have dubbed the period the Great Recession.Another difference this time: A sharp, steady decline in interest rates beginning in the 1980s drove the post-double-dip recovery. Today, however, interest rates are already at record lows. That poses the question: What could pull the economy out of a recession this time?Government spending seems tapped out, as the latest debate over the debt ceiling in Washington, D.C., showed. The Federal Reserve fired a massive amount of ammunition at the recession, going to extraordinary lengths to spur growth. While the central bank may still have a few tricks up its sleeve, skeptics say they won’t be enough to pull the economy out of a steep slowdown.Recent signals “show an economy with very weak growth prospects,” IHS chief economist Nigel Gault wrote in a note Friday. “It is ... disturbing that policymakers do not seem to have the weapons to match the risks we are facing.”Of course, if the Fed picks up a whiff of deflation – a steady decline in core consumer prices – there’s little question that it will throw the kitchen sink at it. Concerns about deflation were behind the Fed’s stimulus moves in 2009 and 2010.Deflation can devastate an economy, because consumers often stop spending, expecting prices to decline further. In the 1930s, a prolonged period of deflation triggered years of economic chaos.Not everyone agrees that the economy is sputtering, of course. Bob Doll, chief equity strategist at BlackRock, pointed out in a Friday report that gasoline prices are declining and banks are starting to lend more to small businesses. And the temporary impact of the earthquake and tsunami in Japan on the global supply chain is easing.“For all these reasons,” he wrote, “we do not believe the United States will be entering a recession anytime soon.”A month ago, Wrightson ICAP chief economist Lou Crandall was optimistic that the economy was on a path toward solid growth in the second half of the year. Now, he says, he’s become more concerned, in part because of a negative shift in sentiment. If corporate managers fear that the economy is slowing, they’ll cut back on capital expenditures and put off hiring.While he remains “cautiously optimistic,” he says, “We’re back in a period of maximum uncertainty.”Lonski at Moody’s points out that while growth could pick up, another unforeseen shock, such as a renewed surge in oil prices, could be enough to push the economy over the edge.Perhaps the weakest corner of the economy is job growth. Friday’s jobs report showed that while the unemployment rate in July ticked down to 9.1 percent from 9.2 percent in June, a big factor was that more workers have essentially given up looking for a job. The so-called labor force participation rate – the number of workers actively looking for a job – fell to 63.9 percent from 64.1 percent in June.Economists certainly weren’t hailing Friday’s jobs report as an all-clear signal. “While July’s employment report provides a drop of decent news amidst a downpour of depressing data, it does little to change our fundamental thesis of long-lasting economic sluggishness,” wrote Guy LeBas, a fixed-income strategist at Janney Montgomery Scott, in a note.According to some metrics, the high unemployment rate indicates that the economy is perched dangerously close to a recession. A recent report by Goldman Sachs economist Andrew Tilton showed that, according to historical trends, if the unemployment rate ticks up a mere 0.2 or 0.3 percentage points in the next two or three months, the odds will increase sharply that the economy is either in a recession or will be in one soon.The reason, Tilton argues, is that employment is critical to economic strength because of those crucial self-reinforcing feedback effects.“When economic activity slows enough to push the unemployment rate higher for more than a short period, household income growth is interrupted,” he wrote in a report. “This typically leads to a pullback in consumer spending, and companies respond with further cuts in labor demand.”Perhaps the best argument against the double-dip scenario is a continuing boom in corporate profits. According to Goldman Sachs, 46 percent of the companies in the Standard & Poor’s 500-stock index have reported better-than-expected earnings results for the second quarter. Earnings are on pace to grow 15 percent from a year ago.With more money to spend, companies have the ability to hire more workers. To do so, however, they need to anticipate growing demand. Right now, that’s not the case. The Conference Board’s measure of the confidence of chief executive officers fell sharply in the second quarter. Only 33 percent of CEOs surveyed said conditions improved in the quarter from six months ago, compared with 85 percent in the first quarter.Confidence can easily shift upward again if the economy starts to show signs of life. If it does, all that cash sitting on corporate balance sheets could be unleashed, driving the economy toward a sustained recovery.“This is really a crisis of confidence,” says Moody’s Analytics chief economist Mark Zandi. “Confidence was completely pummeled because of the debt crisis spectacle. But eventually, businesses will know they need to take a chance, just like they have in every business cycle since World War II.”© Copyright 2011 USA TODAY, a division of Gannett Co. Inc., Scott Patterson.
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