Arizona foreclosures

Mortgage Industry Update: Rates, News & More

***Smart Financial Weekly Mortgage Update July 31, 2009***

News Flash!!!!!

From a July 27^th story in the Arizona Republic………………….

An amendment to the state’s foreclosure law (SB 1271) now makes some homeowners in foreclosure liable for the difference between their mortgage and what the lender can get when reselling the home. The new law would affect any Arizona homeowner in foreclosure who has not lived in the home for six consecutive months. This would impact owners of second homes as well as investors. In addition the new law would allow lenders to garnish wages and go after assets. The law is effective September 30, 2009. To correct this action a new bill must be written. However, the Legislature is in special session and the Governor would have to amend the purpose of the session (initially called to deal with the state’s budget crisis). The Realtors Association has asked the Governor to amend the current session but if that doesn’t work the changes to the new law could not be considered until next year.

 

 

Interest Rates

Mortgage rates improved from Monday and by Friday were down about .25%. The Federal government sold a record $200 Billion plus in Notes, Bills and TIPS this week to help finance government spending. The good news is that the instruments were sold and that eased some concerns about our ability to raise money to fund our spending. The bad news is that we continue to spend at a record pace and at some point long term interest rates have to go up.

 

 

 

 

When	Rate
This Week	5.25
1 Month Ago	5.32
1 Year Ago	6.52
2 Years Ago	6.68

 

Note that actual market rates vary geographically and by lender, credit score and Loan to Value.

Source: Federal Reserve Statistical H.15.

 

Mortgage Industry Update

·         There is more discussion in D.C. today about increasing the home buyer’s tax credit to $15,000. The Senate originally approved it but the House reduced it to $8,000. The larger credit would be available to all home buyer’s not just first timers. Apparently the issue will be revisited when Congress gets back from its August recess.

·         HUD announced Thursday that FHA will offer a new FHA Home Affordable Modification Program (FHA-HAMP) about mid August. Details will be available shortly.

 

Good News

·         Second quarter GDP came in at -1.0% lower than forecast -1.5% and suggests economy may have bottomed. First quarter number was revised downward from -5.5% to -6.4%. Note that this is the first time since 1947 we have had four consecutive quarters with negative GDP. This both good news (GDP has improved significantly) and bad news (GDP is still negative).

·         New home sales were up 11% in June and builders have an 8.8 month supply.

·         Median sales price declined year over year by 11% in June according to the government.

·         Home prices were up in May from April by .5% the first monthly increase in 3 years according to Case-Shiller.

·         Home prices declined year over year by 17% in May according to Case-Shiller. The fourth consecutive month where the year over year decline has been less than the previous month.

 

Statistics of Interest/Concern

·         Durable goods fell 2.5% in June the biggest decline since January. Forecast was for .6% decline.

·         Consumer confidence index fell to 46.6 for July from 49.3 in June. A reading of 90 indicates economy is on solid footing.

·         Commercial real estate looks to be the next big challenge for banks as delinquencies accelerate upward as shown in the chart below.

 

 Foreclosure Headlines

·         According to some economists banks and other lenders may have more financial incentive to let borrowers lose their homes rather than do some kind of loan workout. The reason is that foreclosure can be more profitable they say. There are three groups of borrowers. First, those that get their loans modified who without the modification would not be able to make the regular payment (borrowers like myself who is in the final stages of loan modification). Second, those who get modified but are likely to default later (lenders may not want to help because postponing foreclosure can be costly). Three, delinquent borrowers who somehow can keep up their payments without a loan modification (lenders have little incentive to help these folks). So, what to do? Senior Treasury and HUD officials summoned major lender representatives to a meeting to discuss how to step up the pace of foreclosure relief. Apparently there was not much progress at the meeting. My advice continues to be the same and that is every homeowner should be calling their lender and requesting a loan modification or refinancing.

·         The House passed a Foreclosure Rental bill this week. The Neighborhood Preservation Act of 2009 HR-2529 allows banks to lease its REO’s for up to five years. The program is voluntary and the decision to rent is up to the bank or investor.

·         According to Realty Trac California, Arizona, Nevada and Florida had 35 of 50 highest foreclosures rates for metro areas with populations of 200,000 or more.

·         For the first half of 2009 there were 1.5 million properties getting default or auction notices. Nevada had the highest foreclosure rate while Arizona was ninth.

 

Job Market Headlines

·         In June 18 metro areas in the U.S. had jobless rates in excess of 15% according to the Labor Department.

·         Initial weekly jobless claims were up slightly to 584,000 compared to forecast of 575,000. The four week moving average was down for the fifth straight week.

·         Continuing jobless claims dipped to 6.2 million the lowest level since January of this year. The issue here is how many workers have exhausted their unemployment benefits because when benefits are lost the worker is no longer counted.

·         Worker pay grew for the last 12 months ending in June at 1.8% the lowest rate on record.

 

Commentary

This week Countrywide Financial (now part of Bank of America) will send about $7.5 Million to homeowners in Texas as part of a $345 Million settlement stemming from a settlement between it and the Texas Attorney General. The settlement is based on the State’s allegation that between January 1, 2004 and December 31, 2007 Countrywide encouraged “borrowers to sign loans they could not afford, not disclosing risky loan terms and writing loans for unqualified borrowers”. The balance of the money $335 Million is intended to modify loans for 30,000 Texans.

 

The United States government is now the largest shareholder of Citigroup with a 34% interest in the banking giant.

For more information on mortgages or related please contact me at (602) 803-9660 or by e-mail at burt@gosfm.com.