Realty Check

A new report came out this morning with a curious headline: “Foreclosure Activity Declines, Hurting Investors.” I read it twice. You would think declines in foreclosure activity would be a good thing, that is, would help, not hurt. Not in this bizarre housing market. The report is from Foreclosure Radar, a foreclosure sales and analytics website.  » Read More

The nation’s homebuilders are feeling far better again, after an unusually warm winter wreaked havoc with the usual traffic and sales trends. Builder confidence jumped five points in May on the National Association of Home Builders’ sentiment index, after dropping four points in April.

AP

“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” said NAHB chairman Barry Rutenberg in a release.

The index now stands at 29. Fifty is the line between positive and negative sentiment.

Builder confidence had been rising steadily throughout the fall and winter, with the exception of the April blip. While the two components of the index measuring buyer traffic and current sales surged strongly, sales expectations over the next six months were not quite as bullish, although still in the positive.

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CNBC.com

As part of his “To Do List,” President Barack Obama visited Val and Paul Keller on Friday. The White House described them as “responsible” homeowners who owe more on their mortgage than their Nevada home is currently worth.

They owe $168,000 on their mortgage, but their Reno home is currently valued at $100,000.

The president is doing so to, “help demonstrate a concrete and tangible example as to why this broader push [to refinance] is so important not only for millions of Americans but for our economy,” said Shaun Donovan, secretary of Housing and Urban Development, in a conference call with reporters before the event.

During that call, Donovan used the words “responsible homeowners” more than a dozen times, in describing whom the administration’s proposed refinance programs should help.

It is not the Kellers' fault that home prices in Reno are down 52 percent from the peak, right? The Kellers bought their house 14 years ago, and they have not been late on a mortgage payment, according to Donovan. They were able to take advantage of the newly expanded government refinance program through Fannie Mae and Freddie Mac for severely underwater borrowers, and they are in fact putting some of their savings on the monthly mortgage toward paying down principal.

But were they responsible?

The Kellers bought their home before the height of the housing boom. The trouble I’m having understanding this whole scenario is that the median home price in Reno is actually 7 percent higher today than it was 14 years ago. If the Kellers had a “responsible” loan, that would be a 30-year fixed, in which case they should have paid at least some principal on the loan over the last 14 years. And didn’t these “responsible” borrowers, the Kellers, put some money down on the home?

We went looking: According to Washoe County records, the Kellers purchased their home in June 1998 for $127,000. So why do they have, according to the White House, a $168,000 mortgage?

White House officials now confirm to CNBC that the Kellers did a cash-out refinance in 2007, when their home had appreciated to $250,000. Again, it’s not illegal, but are these the “responsible” borrowers that the administration is looking to help? They took out a $178,000 loan, using the $51,000 to pay down debt on the family construction business, so Paul could retire. Had they not taken that money out, and continued paying on the original mortgage, they would not be underwater today.

“This is a family, first and foremost, that has met their responsibility, remained on time with their mortgage and used their equity in their home in a way that so many Americans do, to send their kids to college, support a small business or save for retirement,” said Donovan, whom we contacted after learning of the refinance. “They deserve the chance to benefit from these record low interest rates because they have met their responsibilities.”

Another administration official familiar with the Kellers’ case says the couple were responsible because despite the incredible runup in home prices, they did not take all the equity out of the house. “She did not use her home as an ATM in the sense that we saw during the crisis, because she didn’t cash out all of the equity leaving her no cushion. She had a 71 percent LTV (loan to value ratio), or 30 percent equity in her home. That is by almost any definition a very responsible position to be in,” he added. In the past, Obama has criticized borrowers, who at the peak of the housing bubble, pulled money out, referring to it as using their house as an ATM.

LTV, Donovan and the other administration official claim, is not a minor issue. So it seems they are defining “responsible” as a borrower who maintains an equity cushion in the house, even when that house price has nearly doubled in just eight years.

“This was truly 100 year flood, and so lots of people who had 20, 30, 40 percent equity in their homes now find themselves underwater,” says the White House official, who also commends the Kellers for not walking away from their mortgage.

Questions?  Comments?  And follow me on Twitter @Diana_Olick

The Realtors say it, the home builders say it, and now the chairman of the Federal Reserve is saying it: “Some creditworthy borrowers are still having trouble getting a mortgage.”

Loose mortgage underwriting is largely blamed for the housing crash, and as a result the credit markets have swung in the opposite direction, some say too far.

“You’ll see fewer willing lenders at 660 than you do at the top end of the scale,” notes Bankrate.com’s Greg McBride, referring to FICO scores (Fair Isaac Corporation).

Twenty five percent of Americans today have a FICO credit score lower than 650, and twelve percent more are below 700. While the Federal Housing Administration (FHA), the government’s mortgage insurer, is supposed to be serving borrowers with lower credit scores, the average FICO for an FHA loan in March was 701.  » Read More

A select group of struggling mortgage borrowers are about to get an offer that sounds too good to be true. Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reduction.

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“If people get these things and toss them, they won’t be eligible,” says Ron Sturzenegger, the Bank of America executive charged with providing solutions to borrowers in need of mortgage assistance.

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fotog | Getty Images

I spent much of this week in Atlanta, which is currently one of the worst housing markets in the nation. Atlanta home prices are down 17 percent annually, according to the S&P/Case-Shiller Home Price Index, thanks to a glut of distressed properties.

Foreclosures are plentiful in Atlanta, and as in other highly distressed markets, investors are swooping in, some buying in bulk, to take advantage of the hot rental market. Another new trend helping to alleviate all the distress is short sales.

Short sales (selling the home for less than the value of the loan) are rising across the nation, and while they have yet to overtake foreclosure numbers in Atlanta, they are in fact up 120 percent from a year ago, according to RealtyTrac.

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The number of homes entering the foreclosure process rose in March, up 8.1 percent, according to a new report from lender Processing Services, but the volume is down more than 30 percent from a year ago.

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Analysts had expected this number to skyrocket immediately following the $25 billion settlement between banks and state governments over fraudulent mortgage servicing.

Foreclosures sales, which are the final stage of the foreclosure process, not sales of bank-owned homes, dropped precipitously in March to their lowest point in over two years. They dropped most sharply — 14 percent month-to-month — in states where a judge is not required in the foreclosure process (so-called non-judicial states).

Again, that is contrary to expectations, but could be yet another stall in the system, as banks try to modify more loans to meet some of the terms of the servicing settlement. The foreclosure sales decline also appears to be exclusively in private and portfolio loans, which again points to the settlement.

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Home For Rent

More Americans are renting homes, and fewer are owning them; it’s not as if this is news to anyone who follows the U.S. housing market, but a new report from the Census Bureau today really put an historical exclamation point on the trend.

The share of U.S. household renting reached a fifteen year high, and home ownership reached a 15-year low. Funny how those numbers travel together.

34.6 percent of households were renters in the first quarter of this year, and that number is climbing, as lack of credit or sufficient down payment keeps Americans young and old from becoming home owners. Rental vacancies are therefore falling, the lowest rate out West, where foreclosures have run the highest during this housing crash. That is also where investors are rushing in to buy foreclosed properties and put them up for rent. Single family homes for rent, in fact, surpassed multi-family units, taking 52 percent of the $3 trillion rental market, according to CoreLogic.  » Read More

Tetra Images | Getty Images

Big jumps in foreclosure activity in cities like Pittsburgh, Indianapolis, New York and Raleigh pushed the national numbers higher in the first three months of this year, according to a new report from RealtyTrac, an online foreclosure sales and data company.

A majority of U.S. housing markets posted a quarterly increase in foreclosure activity, although the numbers are still down from a year ago.

“First quarter metro foreclosure trends were a mixed bag,” said Brandon Moore, chief executive officer of RealtyTrac, adding that the increase in the number of cities seeing a quarterly jump is, “an early sign that long-dormant foreclosures are coming out of hibernation in many local markets.”  » Read More

More buyers signed contracts to buy existing homes in March than the previous month, according to a monthly survey just released by the National Association of Realtors.

The Pending Home Sales Index rose 4.1 percent from February and is now 12.8 percent higher than March of 2011.

“The housing market has clearly turned the corner,” said NAR chief economist Lawrence Yun in a release. “Rising sales are bringing down inventory and creating much more balanced conditions around the country, which means home prices will be rising in more areas as the year progresses.  » Read More