No you can't use the tax credit as a down payment.

I keep seeing this pop up as a "I just came up with this great idea" post around the internet. Just to be absolutely, 100% clear, You may not file for the tax credit and then use it for a down payment. Don't take my word for it, from the IRS:

Q. I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.
A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit. IRS news release 2009-27, First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.

Administration set to announce plan for junior liens.

The Administration is set to announce the plan for the modification of second liens. The details aren't fully released yet but their will be an incentive ($500 a year plus $250 the next 3 years) for servicers to modify junior liens. There will also be a payment schedule for the junior lien investors to extinguish the liens. More from the WSJ:

Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.

Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.

The Administration is also announcing new incentives for getting homeowners into Hope for Homeowners in order to increase participation in the program. The silver lining of all this is that servicers should finally finish the triage they started months ago and start foreclosing en masse on those who don't qualify. Once the full plan is announced I will provide the details.

Countrywide is gone.

For those driving out the 101 or 118 in Ventura County you would have seen this already but Bank Of America has rebranded all the Countrywide buildings with the BofA logo. The operation goes further than just putting the new logos on the buildings but eradicating the name across the whole company. Countrywide broker & correspondent formerly found at http://www.cwbc.com redirects you to BofA wholesale. From the LA Times :

Burying the Countrywide name is wise, said Bruce D. Miller, chief executive of Dailey, a West Hollywood advertising firm, whose clients have included several lenders.

"I think it was just too toxic to resuscitate," he said.

Weekly Active/Pending counts SFV & Ventura - 04/24/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2596
Active - Short sale 931
Active - REO 243
Backup - Total 507
Backup - Short sale 228
Backup - REO 95
Pending - Total 1508
Pending - Short sale 556
Pending - REO 570
Distressed active / Total active = 45.2%
Distressed pending / Total Pending = 74.7%

Condo
Active - Total 871
Active - Short sale 443
Active - REO 101
Backup - Total 177
Backup - Short sale 102
Backup - REO 35
Pending - Total 450
Pending - Short sale 159
Pending - REO 196
Distressed active / Total active = 62.5%
Distressed pending / Total Pending = 78.9%

Ventura County:
Single Family Homes
Active - Total 1556
Active - Short sale 257
Active - REO 111
Contingent - Total 865
Contingent - Short sale 553
Contingent - REO 89
Pending - Total 775
Pending - Short sale 190
Pending - REO 321
Distressed active / Total active = 23.7%
Distressed pending / Total Pending = 65.9%
Release from Showing 298

Condo
Active - Total 530
Active - Short sale 137
Active - REO 59
Contingent - Total 325
Contingent - Short sale 230
Contingent - REO 41
Pending - Total 244
Pending - Short sale 60
Pending - REO 105
Distressed active / Total active = 37.0%
Distressed pending / Total Pending = 67.6%
Release from Showing 74

Who would ever invest in mortgage bonds again?

Bloomberg had a great article regarding how mortgage bond investors are getting a raw deal and having existing contracts modified against their will by the government:

Bondholders are preparing for a fight over legislation approved last month by the House of Representatives that would shield companies that collect homeowners’ payments from lawsuits over modified mortgages, even if new terms harm investors. The government’s actions may increase borrowing costs because creditors would demand higher returns to compensate for the risk that once-sacrosanct investment terms can be changed, they say.

“Certainly some greater amount of loans should be restructured, but it is a fallacy to think that policymakers can selectively abrogate contracts without affecting future investor behavior,” Frey, chief executive officer of Greenwich Financial, a mortgage-bond broker and investor in Greenwich, Connecticut, said in an e-mail. “We are actively exploring strategies with major investors to protect their rights.”

A big deal is being made about keeping people in their homes at all costs. But those costs are coming from both the taxpayers and bond holders, who the last I checked are people too. It would be one thing if you invested in lower rated tranches and got wiped out, or poorly structured finance products which didn't adjust for risks properly. But these are people who aren't complaining about the products they bought, they are complaining that the government is stepping in to change the rules of the game after the contract has been signed. Why anyone would ever put money into mortgage bonds again is beyond me. How do you model governments ability to redefine anything they want? This is a huge line being crossed.

By “allocating losses to some place that’s not expecting it,” including state pension plans, college endowments and life insurers, those investors will demand more return to hold mortgage debt without government backing, if they buy at all, said Amherst CEO Sean Dobson, whose firm trades home-loan bonds and advises clients about the securities. “Capital’s going to cost a lot more for a long time.”

If you are in a senior rated tranche you want liquidation over reduced cash flow, you get paid off first with the proceeds when the mortgage is liquidated but with reduced cash flows it spreads the loss more evenly across the tranches. The administration is saying that the servicers can reduce cash flow over liquidate and they will protect the servicers from the lawsuit. The whole article is excellent and I highly suggest reading the whole thing. I made sure none (fine, the smallest bit of my smallest bond fund holds a minor percentage of mortgage bonds) of my investments held mortgage bonds. The risk/reward isn't there and I don't want my money supporting the mortgage market.

More San Fernando Valley home sale information - March 2009

Here is the various Back On Market (BOM) ratios for March 2009 home sales. Note, the local REALTOR® group uses the BOM as a % of sales as their preferred metric.


Here are total sales, total pending and total BOM while pendings leveled off there is still a large number of homes under contract and trying to clear contingencies. I'd expect pendings to rise significantly going into summer. I am also predicting that once this rush of buyers clears through the system we will see year-over-year sales declines around July or August. Currently lenders are being hammered so I could see more of a steady rise of sales instead of a leap as the remaining understaffed lenders work off the backlog of pendings.

This graph is identical the the graph above except for the red line. This red line is a sales estimate based on BOM and current month pendings shifted forward 60 days in time to account for escrows and reporting lag. I have no idea if it is a valid way to look at the market I'm just going to follow it for a bit to see how well it does. It is predicting total sales of around 820 next month which feels a bit low but in the ballpark (I think it will be 880-900).

Bank of America adjust short sale policy

One of the biggest issues facing short sales is the complex interplay between multiple loans, mortgage insurance, servicers interest, pooling service agreements, structured finance products and CDS. As one of the largest servicers (thanks to the Countrywide acquisition) a change in Bank of America's policies regarding short sales can have a wide ranging effect on the market.

But yesterday Bank of America made it easier for a short sale to be completed, from the article:

Until a month ago, B of A and its Countrywide Financial Corp. had required that 10% of a home's sale price go toward paying off home equity lines of credit before they could agree to a short sale. But Terry Francisco, a spokesman for the Charlotte company, said Monday that it changed its policy last month, agreeing to accept 5% of the sale price when there is no equity available to holders of the first or second liens.

The new policy "is based on the assumption that it is in the best interest of all parties involved to accept a short sale, as opposed to proceeding to a foreclosure," Francisco said. "We believed that the previous policies set an arbitrary amount that did not take into account the savings derived from proceeding with a short sale."

B of A expects the change to increase the number of short sales, he said, and even though it is releasing the liens, it reserves the right to pursue deficiency judgments against borrowers.

With foreclosure moratoriums being lifted in the past month, bankers are looking for ways to deal with an anticipated flood of distressed properties and are trying to determine which borrowers will get loan modifications and which will go into foreclosure.

The whole article is excellent regarding the issues facing short sellers and why they aren't closing. I thought the banks would get on the short sale bandwagon a bit sooner because the banking system will net more and the crisis will be over sooner by short circuiting the foreclosure process.

San Fernando Valley March 2009 sales report

San Fernando Single Family Home sales came in at 640. This is up 33.3% from the seasonal low point a month before and up 53.9% from the all time low for a March the year before. The median price was $346,000 which was up 1.8% from the month before and down 26.3% from the year before. The issue for the market is one of inventory. The foreclosure moratoriums and "hope" for a bailout is keeping inventory off the market as every deadbeat homeowner tries to "get theirs". While I don't personally think this will ultimately be a successful strategy it will take some time to get through and meanwhile inventory keeps dropping. After we move through the bulge of pendings caused by this rush of demand I believe sales will slow as buyers have no additional purchasing power and sellers stay in denial.


Condo sales came in at 207. This was up 27.8% from the month before and up 37.1% from the year before. The median price came in at $200,000 which was down 4.8% from the month before and down 36.5% from the year before. Condos continue to perform worse than single family sales as supply is larger and demand is smaller in this area.

Weekly Active/Pending counts SFV & Ventura - 04/17/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2640
Active - Short sale 970
Active - REO 250
Backup - Total 482
Backup - Short sale 206
Backup - REO 100
Pending - Total 1511
Pending - Short sale 561
Pending - REO 567
Distressed active / Total active = 46.2%
Distressed pending / Total Pending = 74.7%

Condo
Active - Total 872
Active - Short sale 468
Active - REO 89
Backup - Total 171
Backup - Short sale 93
Backup - REO 36
Pending - Total 443
Pending - Short sale 159
Pending - REO 188
Distressed active / Total active = 63.9%
Distressed pending / Total Pending = 78.3%

Ventura County:
Single Family Homes
Active - Total 1627
Active - Short sale 297
Active - REO 134
Contingent - Total 853
Contingent - Short sale 536
Contingent - REO 98
Pending - Total 733
Pending - Short sale 173
Pending - REO 302
Distressed active / Total active = 26.5%
Distressed pending / Total Pending = 64.8%
Release from Showing 286

Condo
Active - Total 547
Active - Short sale 161
Active - REO 63
Contingent - Total 306
Contingent - Short sale 206
Contingent - REO 47
Pending - Total 233
Pending - Short sale 57
Pending - REO 102
Distressed active / Total active = 41.0%
Distressed pending / Total Pending = 68.2%
Release from Showing 75

Trustee Sales for LA and Ventura County - mid-April update

Trustee Sales for Los Angeles County for 2009:

Trustee Sales for Ventura County for 2009:

Data courtesy of ForeclosureRadar. These graphs are the results of trustee sales so far this year until April 16th. Most sales are still getting postponed. 3rd party sales are investors buying at the courthouse steps and Beneficiary means the sale reverted to the lender. I don't have a good way of segmenting out the San Fernando Valley from the larger set of Los Angeles County yet. These sales should be viewed in the context of the REOs closed so far per month to see how REO inventory is getting worked off, And this months ForeclosureRadar report for March 2009 for all of California which shows how the foreclosure floodwaters are rising. I will update this dataset mid-month and the first of every month.

Ventura County March 2009 Sales

Dataquick released their March 2009 homes sales report for Ventura County. March sales came in at 776 which is up 41.3% from March 2008 all time low. Median price came in at $326,000 which is down 24.2% from the year before and down 48.2% from the peak. Foreclosure sales are still driving the market but as the spring selling season continues and we have more fair market sales and fewer REO sales the median should start rising a bit. As you can see from the second chart March sales are still very weak. With inventory being so tight I think we should see a slowdown come July or so since buyers have no additional purchasing power. Hopefully trustee sales will start climbing to bridge the gap between current supply and demand and keep sales going.

California Foreclosures for March 2009

ForeclosureRadar came out with their March 2009 foreclosure report. Notice of Defaults (NOD) rose to a new high. Notice of Trustee sales increased signficantly and trustee sales decreased. Quite a mixed report. Since NODs are the leading indicator it looks like things are going to start deteriorating even more later this year once some of that supply hits the market. One other possible explanation is that people are learning more about loan modifications and are intentionally defaulting in hopes of getting a better loan modification. There is significant lags between NOD, NTS and actual trustee sales add in all the government programs and I think this data set will have a lot of noise over this next year.

As a look ahead for April Trustee Sales for Ventura County have been about 92 over 10 business days relative to 143 sales over 22 business days the month before (9.2 per day vs 6.5 per day). For Los Angeles County we are at 1,030 sales so far relative to 1,599 the month before (103 per day vs 72.6 per day) so trustee sales are starting to rise but not dramatically. I suspect the servicers are waiting for the standardized GSE net present value (NPV) test for loan modifications before the foreclosures decision is made. James Lockhart has indicated that will come "very soon".

Foreclosure auctions for Ventura and San Fernando Valley..

Here is a short list of upcoming foreclosure auctions:

REDC - Claims an online only auction starting April 17th.. Except the homes are open to show April 18th? This is probably leftovers from previous auction.

Hudson and Marshall - Auction coming up in early June, no properties listed yet. Something to keep an eye on in the near future.

Zetabid - Mostly properties from outlying areas but some Ventura County and San Fernando Valley area homes.

Considering how good the market is for REOs I can't imagine a quality property falling through but there might be a good fixer out there.

Note: I'm working on defining shadow inventory but the data set is large and cumbersome on 2 different portals. While I try to figure out a good way to match the data if someone wants a smaller area, a specific city they are looking at, post it in the comments and I'll see if I can make a post out of it.

Lots of empty homes..

This is Ventura County March 2009 sales broken down by sales type (Fair Market, Short sale, Foreclosure/REO) and within each group sales broken down by Occupant type (Owner, Tenant, Vacant). For REOs they were all empty but some had the wrong flag set but other flags indicate they were vacant, I left the data as pulled since it didn't really matter that much. For Fair Market sales I think it is important to note the number of vacant homes. An owner of a vacant home is going to be much more motivated than one living in a home while selling. Tenant and Owner occupied homes provide some sort of economic benefit to the owner. I will have to see if I can come up with a comparable chart for the SFV.

I'm still trying to figure out a way to quantify the current market, many of the sales coming through are significantly (5%) discounted from list, especially if over 30 Day On Market. Simple SP / LP ratio doesn't captures it enough but one thing is clear the sales are being so good because the sellers have become much more flexible and realistic on selling terms.

Weekly Active/Pending counts SFV & Ventura - 04/10/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2665
Active - Short sale 987
Active - REO 273
Backup - Total 480
Backup - Short sale 197
Backup - REO 100
Pending - Total 1474
Pending - Short sale 558
Pending - REO 563
Distressed active / Total active = 47.3%
Distressed pending / Total Pending = 76.1%

Condo
Active - Total 907
Active - Short sale 465
Active - REO 109
Backup - Total 162
Backup - Short sale 84
Backup - REO 31
Pending - Total 419
Pending - Short sale 151
Pending - REO 180
Distressed active / Total active = 63.3%
Distressed pending / Total Pending = 79.0%

Ventura County:
Single Family Homes
Active - Total 1675
Active - Short sale 355
Active - REO 134
Contingent - Total 840
Contingent - Short sale 515
Contingent - REO 97
Pending - Total 688
Pending - Short sale 150
Pending - REO 305
Distressed active / Total active = 29.2%
Distressed pending / Total Pending = 66.1%
Release from Showing 281

Condo
Active - Total 587
Active - Short sale 176
Active - REO 72
Contingent - Total 286
Contingent - Short sale 190
Contingent - REO 48
Pending - Total 220
Pending - Short sale 50
Pending - REO 99
Distressed active / Total active = 42.2%
Distressed pending / Total Pending = 67.2%
Release from Showing 71

Obama refinance plan coming to fruition.

The biggest part of the Obama Administrations plan to solve the housing crisis is not the much ballyhooed loan modification program but instead the mortgage modification program for borrowers as much as 5% underwater on their first liens. With the Fed monetizing almost a trillion dollars in debt to keep mortgage rates low the plan is to get the people in the danger zone of default to commit to their homes and get a lower monthly rate. Major banks such as Wells Fargo and Bank of America have started refinancing under the plan, most just Fannie Mae loans for technical reasons but Freddie Mac loans will soon follow. For people with a Fannie Mae loan they can refinance through anyone, people with a Freddie Mac loan must refinance through their servicer to take advantage of the new program. You can find out which type of loan you have here.

Today President Obama encouraged people to refinance:

Mr. Obama urged Americans to take advantage of current low mortgage rates, so they can stay in their homes and spend more on other needs.
He estimated 7 million to 9 million people could refinance, saving $1,600 to $2,000 a year. "That is money in their pocket," he said. "We are at a time where people can really take advantage of this, and what we want to do is to send a message that if you are having problems with your mortgage -- and even if you're not, and you just want to save some money -- you can go to makinghomeaffordable.gov."

The printing presses are running to put dollars directly in the pockets of struggling homeowners following Professor Bernankes formula to stop deflation.

California foreclosures to rise dramatically soon?

Mr. Mortgage has finished his move and is starting to post. He has lender specific data from ForeclosureRadar and he believes by mid-summer foreclosure / REOs should rise dramatically. I was speaking to a local REO broker a couple weeks ago who said he was hearing from his "AM" (asset managers) that to get ready by mid-summer for a rush of inventory. Right now the market is running out of motivated inventory so any new well priced inventory would be a welcome addition.


I recommend going over to Mr. Mortgage's new blog and reading the whole post but I will post the following graphic to whet the appetite:

Servicers overloaded on loan modifications

The Wall Street Journal has an article regarding mortgage servicers having trouble finding enough people to handle the surge of defaults. What is clear that the servicers are doing everything possible to get homeowners to take loan modifications over foreclosures. The biggest issue is that most loan modifications are absolutely horrible deals for current homeowners and anyone that can do a lick of math can see that. I think the servicers would be better off hiring people with sales experience instead of servicing experience because these people have the aptitude in convincing people into making economically bad choices. The above picture from the article shows that loan modifications are re-defaulting at a high rate as both the economy and the realization that they are maximizing the overpayment of a depreciation asset are taking over.

Snippets from the article:

Finding the right employees with the right temperaments is among numerous struggles facing mortgage-servicing firms. With millions of loans needing to be considered for modifying, the firms also are finding their computer systems outdated and incapable of processing the data.
At the same time, the mortgage-servicing firms are under pressure to meet the mandate laid out by the Obama administration to help keep people in their homes.
...
"You've got a situation in the industry where all of the trained, experienced collectors -- the resolution consultants -- anybody who's out there with training, they're hired. They're sopped up," Mr. Koches said. "There is an unprecedented demand. So we've got to go out there and find people who don't have that training background."

Foreclosure moratorium update

For those following the trustee sales for their local area (links on the right hand side of the blog) for up in Ventura County there was a small initial rush and then back to postponing the majority of sales. Anyone seeing anything different for areas they are following? Trustee Sales are greater than before the moratorium but not nearly enough (IMHO!) to keep contingent/pendings at this level going into summer.

Weekly Active/Pending counts SFV & Ventura - 04/03/09

Here are the weekly inventory and pending counts for Ventura County and the San Fernando Valley. For the legend Single Family Homes is abbreviated SFH, Ventura County is abbreviated VC and San Fernando Valley is abbreviated SFV. For readers who might not know, REO are bank owned foreclosures and short sales are owners hoping to sell the home for less than what is owed on the mortgage balance.

I almost want to say the market is getting irrational again but that would suggest it was rational at some point. I think the constrained supply is leading those active shopping in the market to make some very poor choices that I think they will come to regret in the not too distant future. Or I could just be wrong about the strength of demand. We shall soon see.

Update: Please see the home page for the latest graphs, I am reverting earlier weeks to text to maintain site speed.

San Fernando Valley:
Single Family Homes
Active - Total 2780
Active - Short sale 1010
Active - REO 302
Backup - Total 467
Backup - Short sale 195
Backup - REO 105
Pending - Total 1410
Pending - Short sale 541
Pending - REO 541
Distressed active / Total active = 47.2%
Distressed pending / Total Pending = 76.7%

Condo
Active - Total 934
Active - Short sale 476
Active - REO 120
Backup - Total 162
Backup - Short sale 82
Backup - REO 34
Pending - Total 405
Pending - Short sale 148
Pending - REO 172
Distressed active / Total active = 63.8%
Distressed pending / Total Pending = 79.0%

Ventura County:
Single Family Homes
Active - Total 1744
Active - Short sale 389
Active - REO 162
Contingent - Total 774
Contingent - Short sale 475
Contingent - REO 94
Pending - Total 649
Pending - Short sale 145
Pending - REO 279
Distressed active / Total active = 31.6%
Distressed pending / Total Pending = 65.3%
Release from Showing 283

Condo
Active - Total 606
Active - Short sale 181
Active - REO 78
Contingent - Total 282
Contingent - Short sale 187
Contingent - REO 46
Pending - Total 218
Pending - Short sale 47
Pending - REO 108
Distressed active / Total active = 42.7%
Distressed pending / Total Pending = 71.1%
Release from Showing 69

The ice melted a bit...

I just finished checking Fidelityasap and Recon Trust for Ventura County for trustee sales. For Fidelityasap there were 5 homes taken back in the last 7 days before today. Today 10 homes were taken back in the county. On Recon Trust there were 6 trustee sales in the last 30 days in Ventura County, today there were 3 sales.

There were still a lot of sales getting postponed but it is a tentative sign that new inventory will be coming soon and the moratorium is over.

Update (04/02/09): The priority posting site was down yesterday. Checking today & yesterday there were 11 trustee sales completed for Ventura County. In the 15 previous days before that there were 20 sales.

If there are 20 or so sales completed a day in the county that is still above the rate of absorption for REOs we are seeing currently in the market.

Short Sale & Foreclosure for San Fernando Valley & Ventura County - March 2009

Thanks to Tim Iacono over at "The Mess That Greenspan Made" for the idea of the stacked chart using the following data.

Note: Updated Monday 04/06/09

San Fernando Valley:

Ventura County:

Here are the sales breakdown for the San Fernando Valley and Ventura County for March 2009. Distressed sales are still the majority of sales and short sales are slowly gaining strength. I should note that there are late reporters (more in the SFV than VC due to local custom) that will change these numbers by mid-March but the ratios don't change very much. Notice how unlikely it is for a normal seller (blue bar) to get sold in this market, most don't want to compete with short sales or foreclosures and don't have a "special" enough house to make a buyer pay the premium the sellers would want for their home.