Thursday, July 30, 2009

FHA to allow deferred payment on up to 30% of principal

From the Wall Street Journal:
...the FHA plan seeks to reduce mortgage-related payments to 31% of monthly income. But it gets there in a different way, by focusing on changes in the principal amount rather than the interest rate.
Under the FHA plan, mortgage servicers can reduce the amount of principal on which the borrower must make loan payments by as much as 30% to get monthly payments to affordable levels. The borrower makes the reduced payments for the life of the loan, but is responsible for paying off the full loan amount when the home is sold or the loan is refinanced. This approach is designed to fit guidelines set by Congress, FHA officials said.

It will be interesting to see the specifics of the deferment. If it only requires the repayment of the principal without the interest arrears that seems like a huge boon to FHA borrowers.

Tuesday, July 28, 2009

Ventura County Demand versus Inventory - July 2009

This is June 2009 Demand versus Inventory for Ventura County. I have broke down demand into 3 separate parts, Completed sales, properties under some sort of contingent contract and properties that have cleared contingencies and are waiting to close escrow. If you compare this months chart with last months chart we see demand pending/contingent demand starting to weaken further on the high end where it appears the seasonal rush is over. Inventory in the middle ranges looks like it is improving and the drops in inventory on the higher end appears to be sellers dropping price as the lower price points increase at the same time the higher ends decrease. It is clear all the major activity is on the low end but supply is still constrained. Buyers aren't able to push price and are just searching for deals wherever they can find them.

Monday, July 27, 2009

Newsflash: Loan modifications still aren't the answer

From the Washington Post:
Government initiatives to stem the country's mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.
...
"There has been this policy push to use modifications as the tool of choice," said Michael Fratantoni, vice president of single-family-home research at the Mortgage Bankers Association. But "there is going to be this narrow slice of borrowers for which modifications is the right answer."
...
Mark A. Calabria, director of financial-regulation studies at the Cato Institute, warned that political rhetoric is driving the policy discussion. "What we really need to do is have an honest debate about what are the magnitudes of people we really can help," he said.

There is much more in the excellent article. The point I want to emphasize is that the administration has taken the stance that loan modifications are the best solution to the housing bust. It is clear this is not the case. It is not often in the lenders best interest or the borrowers best interest. It would be much better to let the borrowers and lenders do what is in their financial best interest. If the administration really must interfere then designing a FHA program that allows people to buy soon after foreclosure with higher insurance premiums would be a way to keep the market from undershooting. Between that and a tax credit for all buyers instead of just FTHB there would be plenty of stimulus in the marketplace to keep the market going.

Sunday, July 26, 2009

Cleveland Fed: Ten myths about subprime mortgages

From the Cleveland Fed:

Myth 1: Subprime mortgages went only to borrowers with impaired credit
Myth 2: Subprime mortgages promoted homeownership
Myth 3: Declines in home values caused the subprime crisis in the United States
Myth 4: Declines in mortgage underwriting standards triggered the
subprime crisis
Myth 5: Subprime mortgages failed because people used homes as ATMs
Myth 6: Subprime mortgages failed because of mortgage rate resets
Myth 7: Subprime borrowers with hybrid mortgages were offered (low) “teaser rates”
Myth 8: The subprime mortgage crisis in the United States was totally unexpected
Myth 9: The subprime mortgage crisis in the United States is unique in its origins
Myth 10: The subprime mortgage market was too small to cause big problems

Saturday, July 25, 2009

Weekly Active/Pending counts SFV & Ventura - 07/25/09

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 1990
Active - Short sale 589
Active - REO 177
Backup - Total 677
Backup - Short sale 401
Backup - REO 42
Pending - Total 1628
Pending - Short sale 749
Pending - REO 417
Distressed active / Total active = 38.5%
Distressed pending / Total Pending = 71.6%

Condo
Active - Total 676
Active - Short sale 334
Active - REO 72
Backup - Total 250
Backup - Short sale 188
Backup - REO 12
Pending - Total 526
Pending - Short sale 276
Pending - REO 129
Distressed active / Total active = 60.1%
Distressed pending / Total Pending = 77.0%

Ventura County:
Single Family Homes
Active - Total 1446
Active - Short sale 196
Active - REO 85
Contingent - Total 990
Contingent - Short sale 666
Contingent - REO 57
Pending - Total 695
Pending - Short sale 189
Pending - REO 220
Distressed active / Total active = 19.4%
Distressed pending / Total Pending = 58.8%
Release from Showing 293

Condo
Active - Total 447
Active - Short sale 91
Active - REO 47
Contingent - Total 414
Contingent - Short sale 306
Contingent - REO 26
Pending - Total 257
Pending - Short sale 86
Pending - REO 82
Distressed active / Total active = 30.9%
Distressed pending / Total Pending = 65.4%
Release from Showing 66

Thursday, July 23, 2009

FHFA won't drop the new appraisal process without a fight.

The regulator overseeing Fannie Mae and Freddie Mac came out swinging in defense of HVCC. Maybe since HVCC is designed to protect the lender and the taxpayers are now on the hook for the GSE's the FHFA is thinking that the HVCC is actually a good thing (imagine that!).

This was a three page letter in defense of the HVCC, It looks like the NAR will have a fight on their hands to try and get the HVCC moratorium put in place. The NAR has a lot of politicians in its pocket but the FHFA not backing down is a big roadblock.



Tuesday, July 21, 2009

San Fernando Valley June 2009 sales report


San Fernando Valley Single Home Sales for June 2009 came in at 775 which is up 9.46% MoM and up 15.50% YoY. Median Price came in at $375,000 which is up 7.14% MoM and down 12.99% YoY. As you can see from the historic chart for June sales are still very weak. Active inventory continues to be drawn down but the number of sales at contingent / pending are an open question as to how many can actual close. So far the level of sales relative to pendings is pretty low.


San Fernando Condo sales for June 2009 came in at 236 which was up 4.42% MoM and 2.61% YoY. The median sales price came in at $226,000 which was up 22.16% MoM but down 23.39% YoY. The median price is especially variable due to the low volume and constant mix shift.

Friday, July 17, 2009

Loan modifications dropping FICO scores

Bloomberg has a story up on loan modifications effect on FICO scores. While many homeowners FICOs are trashed anyways due to late payments, those hoping to preserve a high FICO and get a loan modification might not realize that the payments will reported as less than the agreed amount and reduce the FICO score. This does represent a higher risk to lenders and is entirely appropriate but some might not realize there credit will be affected adversely.

From the article (emphasis added):

Victor Stern thought his money troubles were over when he got approval to modify his home loan. Then his credit score dropped 121 points.
...
“There should be clear disclosures so consumers understand this is a major hit on the credit score,” said Evan Hendricks, Washington-based author of “Credit Scores & Credit Reports.” “There’s no sugar-coating the reality of the negative impact.”
...
We view an account that has been settled or renegotiated for less than the full amount as a negative because historically consumers on reduced payment plans represent a greater risk,” said Ethan Dornhelm, a principal scientist at FICO’s San Rafael, California, office. The size of the impact may be more for borrowers with higher credit scores, he said.
...
“If you’re a lender, you want to know that a borrower had to have a loan modified to keep up with payments,” said Greg McBride, senior financial analyst at Bankrate.com, who is based in North Palm Beach, Florida. “It’s not unfair that a loan modification impacts a credit score since the borrower didn’t meet the original obligation.”

Thursday, July 16, 2009

Mid-July Foreclosure update for San Diego County


Here is the mid-month update for San Diego County for July 2009. The pace of sales have slowed month over month but the third party participation is rising. Investors are feeling more confident in their ability to buy at the courthouse (wholesale) and selling on the MLS (retail).

Mid-July Foreclosure update for Orange County



Here is the Mid-month update for Orange County for July 2009. Third party sales are still at what I would consider "speculative" levels. The pace of sales have slowed somewhat from the previous month probably from the foreclosure moratorium. Even though most servicers are exempt they appear to be holding off on foreclosing anyways.

Mid-July Foreclosure update for Los Angeles County



Here is the mid-month update of trustee sales for July 2009 for Los Angeles County. Sales are at a slower pace than June and 3rd party participation is the lowest of the 4 counties being tracked suggesting some opportunity for investors to jump in.

Mid-July Foreclosure update for Ventura County


Here is a mid-July update of trustee sales for Ventura County. Sales have slowed a bit, possibly due to the foreclosure moratorium even though most servicers are exempt. I think the level of third party sales is reaching speculative levels. They are particularly concentrated in Simi Valley and Oxnard. The Simi Valley group has purchased 7 of the last 10 trustee sales and is clearly trying to corner the market and push price.

Wednesday, July 15, 2009

Ventura County June 2009 Home Sales


The June 2009 Ventura County homes sales were announced by Dataquick today. Sales came in at 844 which is up 5.9% MoM and up 10.0% YoY. Sales are still very weak and only 5% mortgage rates, a tax credit and normal seasonal demand have made the sales as "good" as they are now. Median sales price has shown seasonal improvement at $365,000 which is up 2.8% MoM and down 13.1% YoY. With foreclosures dominating the winter sales the median overstated the correction just as the median improvement now overstates its strength. As I have shown with my monthly charts the REO portion of the market has moderated somewhat, Dataquick reports the same phenomenon happening across the Southland with REO sales showing a smaller slice of the market.

Supply is still highly constrained though improving slightly. As long as the government can keep long rates around 5% and a cap on foreclosures the price declines on the low end will be muted.. the mid to high end still has some room to fall. Any increase in long rates will directly translate into reduced prices in the market. In my opinion, I think the buying activity now is highly speculative and based on a rosey scenario developing over the near term future.

Tuesday, July 14, 2009

California Foreclosures for June 2009

The June 2009 ForeclosureRadar foreclosure report for California was released today. It continued to show high levels of Notice of Defaults (NoD), Notice of Trustee Sales (NTS) and Trustee Sales.

A couple of points regarding the new foreclosure moratorium and it's effect on servicers. Even though many servicers are exempt from the provisions they are apparently taking extra time and slowing down filings as a result of the law. From the report:
A new statistic we are watching closely is the number of properties actively scheduled for sale – meaning that a Notice of Trustee Sale has been filed to set the auction date and time, but the foreclosure has not yet been sold or cancelled. Under California’s foreclosure code, a foreclosure sale can be postponed repeatedly for one year before a new Notice of Trustee Sale has to be filed. While postponements are quite common, they have reached record levels in recent months, swelling the number of scheduled foreclosures 90.1 percent year-over-year to 113,141.

“A number of lenders appear to have self-imposed California’s latest foreclosure moratorium on themselves, despite having received an exemption from it,” says Sean O’Toole, founder and CEO of ForeclosureRadar. “Given the number of exempt lenders it was quite surprising to see Notice of Trustee Sale filings drop by nearly 50 percent the day the new law went into effect.”

I went on FidelityAsap and download all the NTS that were scheduled within the last 7 days. I have been noticing on trustee posting sites that on the scheduled day of the auction many auctions are cancelled due with a cancellation date of 06/12/09. This date coincides with the Friday before the new California law went into effect. Unfortunately the download in which I can sort and do queries on shows the day of cancellation as the scheduled day of sale. But from my observation a significant number of servicers have cancelled many NTS and I am not quite sure if they are refiling or just plain holding off. I don't think ForeclosureRadar has yet caught up to all the cancellations due to the the posting sites are recording them but I think Sean will start seeing the bulk of the cancellations come through in the next month.

For the Trustee Sales scheduled for LA County pulled from FidelityASAP within the last 7 days I see the following breakdown:
1219 - Cancelled
314 - Back to Beneficiary
68 - Sold to third party
4589 - Postponed

As you can see the majority are being postponed. I think the Cancellations are more a one off event based on certain servicers overdoing their compliance with the new law. This is just one posting company and there are several out there but it gives a good idea of what is happening in the market. I will be posting a mid-month update for trustee sales on June 16th (first 11 business days of the month).

Note: I have added a foreclosure research link to the site, see here.


Monday, July 13, 2009

HELOC / 2nd lien mod program ramping up

From Bloomberg:
U.S. banks are likely to begin signing contracts as soon as this month that would let second mortgages and other home-equity debt be reworked under a government-subsidized program, a Treasury official said.
Contracts may be signed this month or in early August, the official, who asked not to be identified discussing private talks, said in an e-mail yesterday. On April 28, when provisions for the expansion of President Barack Obama’s $75 billion “Home Affordable” plan were announced, officials said the second-lien program would be up and running in about a month.

Looks like the bank stocks will be under some stress again this fall:
“It is well understood that the four major banks would likely need an additional capital injection should they be forced to mark the second-lien mortgages on their balance sheets to a realistic value,” Greenwich Financial’s Frey said.

Sunday, July 12, 2009

A realistic look at loan modifications

Calculated Risk linked to a research report by the Federal Reserve bank of Boston. It directly contradicts the popular theory that is pushed by politicians and the media that loan modifications are "win-win" for the borrower and lender. The risk of re-default and the risk of giving modifications to people who would have cured in the face of foreclosure turn out to tilt the net present value test to foreclosure in most cases. The fact that so many loan modifications are happening are really more a testament to the political pressure faced by lenders and servicers rather than the economic reality surrounding modifications. Put simply, if loan mods were really all that and a bag of chips, lenders would have already been doing them.

I highly recommend reading the whole paper but here is part of the conclusions from the paper (emphasis added):
Since we conclude that contract frictions in securitization trusts are not a significant problem, we attempt to reconcile the conventional wisdom held by market commentators, that modifications are a win-win proposition from the standpoint of both borrowers and lenders, with the extraordinarily low levels of renegotiation that we find in the data. We argue that the data are not inconsistent with a situation in which, on average, lenders expect to recover more from foreclosure than from a modified loan. At face value, this assertion may seem implausible, since there are many estimates that suggest the average loss given foreclosure is much greater than the loss in value of a modified loan. However, we point out that renegotiation exposes lenders to two types of risks that are often overlooked by market observers and that can dramatically increase its cost. The first is “self-cure risk,” which refers to the situation in which a lender renegotiates with a delinquent borrower who does not need assistance. This group of borrowers is non-trivial according to our data, as we find that approximately 30 percent of seriously delinquent borrowers “cure” in our data without receiving a modification. The second cost comes from borrowers who default again after receiving a loan modification. We refer to this group as “redefaulters,” and our results show that a large fraction (between 30 and 45 percent) of borrowers who receive modifications, end up back in serious delinquency within six months. For this group, the lender has simply postponed foreclosure, and, if the housing market continues to decline, the lender will recover even less in foreclosure in the future.

We believe that our analysis has some important implications for policy. First, “safe harbor provisions,” which are designed to shelter servicers from investor lawsuits, are unlikely to have a material impact on the number of modifications and thus will not significantly decrease foreclosures. Second, and more generally, if the presence of self-cure risk and redefault risk do make renegotiation less appealing to investors, the number of easily “preventable” foreclosures may be far smaller than many commentators believe.

Saturday, July 11, 2009

Weekly Active/Pending counts SFV & Ventura - 07/11/09

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 2017
Active - Short sale 603
Active - REO 187
Backup - Total 665
Backup - Short sale 379
Backup - REO 38
Pending - Total 1599
Pending - Short sale 723
Pending - REO 413
Distressed active / Total active = 39.2%
Distressed pending / Total Pending = 71.0%

Condo
Active - Total 689
Active - Short sale 360
Active - REO 65
Backup - Total 253
Backup - Short sale 186
Backup - REO 12
Pending - Total 488
Pending - Short sale 248
Pending - REO 132
Distressed active / Total active = 61.7%
Distressed pending / Total Pending = 77.9%

Ventura County:
Single Family Homes
Active - Total 1405
Active - Short sale 176
Active - REO 79
Contingent - Total 991
Contingent - Short sale 655
Contingent - REO 77
Pending - Total 703
Pending - Short sale 211
Pending - REO 196
Distressed active / Total active = 18.1%
Distressed pending / Total Pending = 57.9%
Release from Showing 292

Condo
Active - Total 442
Active - Short sale 85
Active - REO 39
Contingent - Total 412
Contingent - Short sale 305
Contingent - REO 26
Pending - Total 244
Pending - Short sale 77
Pending - REO 85
Distressed active / Total active = 28.1%
Distressed pending / Total Pending = 66.4%
Release from Showing 67

Thursday, July 9, 2009

Time: Advice from an Economist Who Saw 1929

I thought this was interesting:

Should the government be bailing out troubled banks or letting them
fail?
I'm opposed to the government bailing out firms that should be shut down because they are basically insolvent. A firm that's insolvent should be encouraged to file for bankruptcy and rid the market of an institution that's using resources that could be better used by productive firms.

Are you just talking about financial institutions or companies in
general, such as GM?
It applies to any kind of firm that isn't solvent.... It should be encouraged or even compelled to file for bankruptcy. When you keep on bailing out institutions indiscriminately, there is no incentive for them to be prudent in what they're doing, because ... the government will come along and bail them out.

So you think the auto industry should not have been bailed
out?
If GM was on the verge of bankruptcy, it should have been shut down. There's all this capacity in the production of cars, but there isn't a market that can absorb all that these firms are prepared to produce. If jobs are lost, then jobs are lost because these are firms that cannot exist, because there is insufficient market demand for their product. And if there is no such market demand, they should not be allowed to exist. Let the market decide if these firms deserve to exist. Government should not be the one who's the arbiter.

There is more in the article.

H.R. 3068 Tarp for Main Street 2009

One of the biggest complaints about TARP was that the taxpayers wouldn't get paid back and the taxpayers would be out $700 billion dollars.

Well, it turns out at least some of the banks ARE paying it back with interest. So what does Barney Frank want to do with the paid back proceeds? If you said pay it back and reduce the deficit, you are wrong. H.R. 3068 has provisions for $2 billion dollars in loans to borrowers to help pay their mortgage. Fannie Mae and Freddie Mac tried loans just like this to help reduce the foreclosure problem. They discontinued the program because, not unsurprisingly, it turns out borrowing money to catch up on all the money you borrowed isn't a solution to the problem. There is $4 billion more of giveaways in the bill as well.

I can't fathom how Barney Frank keeps getting re-elected. It has to be from people who want to vote themselves a paycheck instead of earning it.

I realize this sounds like a political post but I am about as apolitical as they come as I dislike both sides. I guess Barney Frank keeps getting my goat. I can only hope and pray that somewhere along the way H.R. 3068 gets quashed.

Wednesday, July 8, 2009

They say it like it is a bad thing...

The San Francisco Chronicle has an article titled, "Undocumented income makes it hard to get a loan". Now apparently we are supposed to be abhorred at the tight credit conditions because no-doc and stated income loans aren't being brokered out anymore.
With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800, Jennifer France and her partner would seem like ideal candidates for a mortgage refinance.
...
But when they applied to swap an interest-only loan on their nearly $1 million San Carlos home for a 30-year fixed that locked in today's low rates, they were summarily denied. The reason: effectively, because both operate their own businesses.
...
While the amount they make is easily enough to qualify for the new loan, tax deductions for self-employed workers dropped their official income below the threshold that banks wanted to see.

What a terribly sad story. Except when you think about the real nitty-gritty details. Either the write-offs on their taxes are legitimate.. or they are using them to hide income. Now this isn't true in all cases, depreciation on rental properties (or crops) is an example. An underwriter could dig through the tax returns and separate the wheat from the chaff but the reward really isn't there for the bank. In reality the stated-income programs are really about the people who aren't paying their fair share of taxes and want to use that extra money to buy houses.

I am a firm believer in no-doc and stated income loans shouldn't be brokered. They are specialized loans that are for people with a solid relationship with their banks. It was the same niche that option-arms existed in for years without being a problem. They fill a small niche and just aren't suited for the cookie cutter approach since each small business is highly variable. As to the people in the story, its a little weird that they are making 300k and only have "tens" and not "hundreds" of thousands of dollars in the bank. It sounds more like a bank didn't want to take a risk on marginal borrowers. Yes, you can make hundreds of thousands of dollars and still be marginal if your income and expenses are running closely together. You are highly dependent on cash flow and it didn't sound like they had any other assets to back them up except a depreciating house.

Sunday, July 5, 2009

In any other time in history this would be a short sale...

I've spoken before how supply of not only soon to be foreclosures but short sales are being held off the market due to owners thinking they can get a loan modification instead of dealing with the reality of their situation.

Here is an example from Everett, Washington (emphasis added):
Deanna Skinner lives in her dream house in east Everett. But when she and her husband divorced last year, they knew they'd have to sell -- and at a time when the real estate market was crumbling.

When the Obama administration announced its affordable refinance program earlier this year, Skinner was inspired, thinking she'd found a way to keep her home through refinancing or loan modification.
You lose half the earning power permanently in your household but get to keep the house? If banks are forced by politicians to offer loan mods now and in the future they have to account for the permanently discounted cash flows for death, disability and divorce? That sure seems like it would make mortgage credit very expensive.

My expectation is that the NPV test will determine that the above borrower is denied and loan mod and will be asked to short sale or face foreclosure. But it is an example, that I feel is rampant, of people not dealing with their current situation because they think a loan modification bails them out of their predicament. It increases the duration of the pain not shortens it. But the banks are counting on homeowners not realizing that for awhile into the future.

Saturday, July 4, 2009

Weekly Active/Pending counts SFV & Ventura - 07/04/09

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 2033
Active - Short sale 631
Active - REO 179
Backup - Total 673
Backup - Short sale 381
Backup - REO 40
Pending - Total 1624
Pending - Short sale 699
Pending - REO 435
Distressed active / Total active = 39.8%
Distressed pending / Total Pending = 69.8%

Condo
Active - Total 681
Active - Short sale 355
Active - REO 59
Backup - Total 258
Backup - Short sale 186
Backup - REO 18
Pending - Total 496
Pending - Short sale 238
Pending - REO 146
Distressed active / Total active = 60.8%
Distressed pending / Total Pending = 77.4%

Ventura County:
Single Family Homes
Active - Total 1400
Active - Short sale 170
Active - REO 93
Contingent - Total 993
Contingent - Short sale 668
Contingent - REO 58
Pending - Total 700
Pending - Short sale 199
Pending - REO 206
Distressed active / Total active = 18.8%
Distressed pending / Total Pending = 57.9%
Release from Showing 299

Condo
Active - Total 440
Active - Short sale 84
Active - REO 40
Contingent - Total 405
Contingent - Short sale 303
Contingent - REO 23
Pending - Total 236
Pending - Short sale 78
Pending - REO 86
Distressed active / Total active = 28.2%
Distressed pending / Total Pending = 69.5%
Release from Showing 67

Friday, July 3, 2009

Don't let your lender take your money!


This sign is at the corner of Devonshire and Topanga Canyon Boulevard in the San Fernando Valley.
I guess these guys are going after the people who borrowed a bunch of money never expecting to actually have to pay it back. I'm sure their phones are very busy.

Ventura County Loan To Value comparison - March 2006 vs March 2009



This is a comparison of loan to value charts for Ventura County of March 2006 vs March 2009. If you click and enlarge the chart it basically shows how much people are putting down at different price points. A dot at 80.0 and $300,000 means that a borrower put 20% down on a $300,000 place. This gives us a feel for how people (down payments, monthly payments and loan type) are getting into the market and where (sale price) they are getting into the market. From my data pull I saw zero FHA loans in 2006.

For people in the market right now if you go to the left hand side and look and find around the price at which you are thinking of buying and then you can go to the right and see what your competition has done as far as down payments and loan types.

The FHA loans at the higher price ranges are, in my opinion, very risky. FHA used to be for low income people and were underwritten with lower DTI ratios. Now they are used somewhat by high income people at higher income ratios, their prospect of higher income is low and lower income is high. I think this will affect the higher end move up markets as the people who rushed to buy have little to no equity for many years. I think this is true of FHA used in massive quantities in the market like we have now (which was 39.1% of the So Cal market in April according to Dataquick). With little down it will take that much longer to buildup significant equity and long term move up and relocation transactions in the market should stay low.

Orange County Loan To Value comparison, July 2006 to April 2009



This is a comparison of loan to value charts for Orange County from July 2006 and April 2009. If you click and enlarge the chart it basically shows how much people are putting down at different price points. A dot at 80.0 and $300,000 means that a borrower put 20% down on a $300,000 place. This gives us a feel for how people (down payments, monthly payments and loan type) are getting into the market and where (sale price) they are getting into the market. From my data pull I saw zero FHA loans in 2006.
For people in the market right now if you go to the left hand side and look and find around the price at which you are thinking of buying and then you can go to the right and see what your competition has done as far as down payments and loan types.
The FHA loans at the higher price ranges are, in my opinion, very risky. FHA used to be for low income people and were underwritten with lower DTI ratios. Now they are used somewhat by high income people at higher income ratios, their prospect of higher income is low and lower income is high. I think this will affect the higher end move up markets as the people who rushed to buy have little to no equity for many years. I think this is true of FHA used in massive quantities in the market like we have now (which was 39.1% of the So Cal market in April according to Dataquick). With little down it will take that much longer to buildup significant equity and long term move up and relocation transactions in the market should stay low.

Applications for new home tax credit no longer being accepted

From the Franchise Tax Board website:

Today, Thursday July 2, is the last day to fax new home credit applications to FTB. As shown in the numbers below, we have reached $100 million in new home credit applications and we will have received 12,000 applications by the end of today. We will not accept applications after midnight tonight. Do not send in applications if escrow has not closed. Applications cannot be accepted and will be denied if escrow has not yet closed.

We planned to receive 12,000 applications since many are duplicates, revised, or invalid. This ensures we have more than enough valid applications to allocate the full $100 million. These additional applications will be subject to the availability of remaining credits.

We will continue to report certificates issued on a weekly basis until the full $100 million has been allocated. We expect to complete processing all certificates in August. We will send a notification in response to all applications received, indicating the amount of credit allocated or denied.


There has been talk about expanding the program but it appears the budget issues will at least delay implementation of additional stimulus. I would imagine these issues will not derail it completely.

Thursday, July 2, 2009

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

Ventura County:

San Fernando Valley:

Note: I have added a foreclosure research link to the site, see here.
Here are the sales for June 2009 for the San Fernando Valley broken down into distressed and non-distressed categories. Non-distressed sales have increase with seasonal demand and lower distressed sale inventory. Distressed sales are continuing to weaken as a percentage of sales matching the trend seen in the weekly inventory reports. This is the main reason sales remain so weak historically, distressed supply is constrained and non-distressed supply is overpriced. Right now distressed supply in many markets is like water drops hitting a hot skillet, it just instantly evaporates. We can see from the trustee sale charts that new inventory will be coming shortly. I recently saw a home go from trustee sale to MLS in under 2 weeks, that is about as good of turnaround as one can expect. Sales could really take off if that happens. Even considering the economy this isn't a bad market to liquidate supply into, low interest rates, a tax credit, a large supply of potential buyers (in California at least) and "Hopium" are all creating an active market on the low end. IMHO, Sellers not getting their price now will never get their price when adjusted for inflation in the future.