Realty Check

Fuse | Getty Images 50 percent of loans in foreclosure in judicial states have not made a payment in two years, as opposed to 28 percent in non-judicial states.

The number of new foreclosures in 2011 dropped nearly 40 percent, according to year-end numbers just released by Lender Processing Services; there is, however, little cause for celebration.

The fall is largely due to moratoria and process reviews stemming from the so-called “robo-signing” foreclosure paperwork scandal.

Mortgage delinquency rates were largely unchanged from last year, which means all that distress will be pushed forward to 2012 and beyond.  » Read More

Tetra Images | Getty Images President Obama announced he was ordering the U.S. Attorney General to create a “Financial Crimes Unit,” its number one task being to go after the banks for faulty mortgage originations and securitizations.

Barely a few days ago, word was that a settlement among state attorneys general and the big banks over faulty foreclosure practice, i.e. “robo-signing”, was imminent.

In fact, there was a big meeting on Monday in Chicago to try to seal the deal. It included Secretary of Housing and Urban Development, Shaun Donovan, Associate U.S. Attorney General. Thomas Perelli, and several Democratic AG’s, including the lead negotiator, Iowa Attorney General Tom Miller.

Now some say that could all be for naught.

During his State of the Union address, President Obama announced he was ordering the U.S. Attorney General to create a “Financial Crimes Unit,” its number one task being to go after the banks for faulty mortgage originations and securitizations.  » Read More

After several largely ineffective programs to help troubled borrowers and after fruitless attempts at budging the hard-line conservator of Fannie Mae and Freddie Mac, President Obama is proposing a brand new refinance program for borrowers who are current on their mortgages, regardless of who owns their loan; the catch is that this one has to go through Congress.

"I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks," the President announced in his State of the Union address.

Unlike previous efforts in the refinance space, including a recently revamped and expanded government program for borrowers who owe more on their mortgages than their homes are currently worth, this plan would not be limited to those with loans backed by Fannie Mae and Freddie Mac, according to senior administration officials. The two mortgage giants own or guarantee about half of the nation's mortgages. It would be open to all borrowers current on their loans.

The Obama administration is offering precious few details, promising more in the coming weeks, but several sources say the plan is to ask Congress to allow the government mortgage insurer, the Federal Housing Administration (FHA), to back refinances of underwater mortgages. No estimates were given as to how many borrowers such a plan could potentially help, only that this would be a voluntary, borrower-initiated plan, and not a blanket refinance of all borrowers.

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If the theme of tonight’s State of the Union address is fairness, then President Obama would be wise to steer clear of housing; most of the proposals to fix the nation’s still struggling real estate market are intrinsically unfair to a large majority of Americans.

From a mass refinance plan to mass mortgage principal forgiveness, the supposed “fixes” will reward some at the expense of far more.

Let’s start with that principal forgiveness. Some Democrats have been hounding the regulator of Fannie Mae and Freddie Mac (the FHFA and its leader Ed DeMarco) to initiate a program to reduce the value of mortgages where the mortgage is larger than the value of the home, i.e. “underwater”. The idea is that this will keep those borrowers from defaulting on these mortgages.  » Read More

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The best and most expeditious way to clear the vast inventory of foreclosed properties weighing down today’s housing market is to get more investors in and sell them these properties at bulk discounts.

That’s what the Obama administration and Federal regulators are currently considering for the thousands of homes currently owned by Fannie Mae, Freddie Mac and the FHA.

While big private equity funds are still largely in a very tedious deal-making stage with banks or waiting on the sidelines for a government program, smaller individual investors are getting in. Nearly 23 percent of home purchases in December were by investors, according to a new survey from Campbell/Inside Mortgage Finance. That is a slight increase from November, but the share has remained largely unchanged for the past year.  » Read More

Tetra Images | Getty Images At a meeting of Mayors Wednesday, the Secretary of Housing and Urban Development, Shaun Donovan, mentioned that a settlement would include principal reduction for about a million borrowers.

For over a year now, state attorneys general have been negotiating some kind of settlement deal with the nations four largest lenders, as well as several smaller ones.

The settlement pertains to faulty foreclosure processing, first uncovered in October of 2010 and now commonly referred to as “Robo-signing.”

Rather than dozens of lawsuits, the states initially were looking to assess one great punishment on the lenders and thereby appease borrowers who felt they were wronged. The banks were looking for wider immunity from securitization issues, and that is largely what has held up the negotiations for so long.

Now, suddenly, after umpteen “we’re close to a deal”s, apparently we’re now really close to a deal, largely because the State of the Union address is next Tuesday, and this is an election year. So at a meeting of Mayors Wednesday, the Secretary of Housing and Urban Development, Shaun Donovan, mentioned that a settlement would include principal reduction for about a million borrowers.  » Read More

Eric Audras | Photoalto | Getty Images 2012 will likely not see as robust rent growth as 2011; housing affordability continues to improve and renting is becoming ever more expensive than owning.

A huge surge in rental demand and comparatively little apartment supply created a boom in multi-family construction in the last year, but with the single family housing market slowly beginning to show signs of life, the concern among banks and investors is that all that supply will hit the market just as rental demand drops off.

Based on preliminary estimates of Q4 '11 activity, multi-family loan origination volume increased to $82 billion in 2011, up from $50 billion in 2010, according to Chandan Economics. Understandably, some lenders and investors are starting to ask questions.

"While 2012 should be another good year for apartment REITs, there is concern amongst some investors and managements that market expectations may be hard to beat," say analysts at Sandler O'Neill. "Based on discussions with managements, revenue growth should match sentiment but expense growth may be the wildcard."  » Read More

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As government, federal regulators and big-money private investors try to figure out a plan for bulk sales of foreclosed properties, big banks are already making deals, but they are few and far between.

The trouble is, they are looking at even bigger write-downs than forecast if they sell these distressed properties in bulk.

"One of the things that might be holding these bulk sales back is that the assets might not have been fully written down by the banks," says Rick Sharga of Carrington Mortgage Holdings, a private equity firm. "The problem for the banks is that in that scenario, when they sell off these assets in bulk, they have to recognize pretty significant losses all at once, rather than spread those losses out over a longer period of time."  » Read More

As the Obama administration and federal regulators work on a program to sell government-owned foreclosures in bulk to investors, those investors aren’t wasting any time stockpiling cash and buying foreclosed properties at auction and from the major banks.

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Oakland, California-based Waypoint Real Estate Group, a major acquirer of so-called “REO to Rental” (Real Estate Owned) just announced a partnership with a private equity firm, Menlo Park, California-based GI Partners, to buy foreclosed properties.

GI Partners has approximately $6 billion of capital under management, according to its website. 

“Our approach to buying distressed single-family houses, renovating them, and leasing to residents who are committed to a path to future home ownership is a viable solution to our nation’s housing crisis,” said Colin Wiel, managing director and co-founder of Waypoint in a press release. “Our partnership with GI Partners ensures we can take the next step in our company’s evolution.”

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Getty Images The Obama administration, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, CNBC has learned.

The Obama administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, is very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials.

There currently are about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), and millions more are coming.

The foreclosure processing delays of last year created a mammoth backlog of properties yet to be processed, which are just now being re-started. One of the initiatives of this program is for the federal government to be in the position to mitigate and manage any new wave of foreclosures, sources say.

Late-stage delinquencies still in the pipeline number close to two million, according to a new report from Lender Processing Services. Foreclosure starts outnumber foreclosure sales by two to one and "the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted," according to LPS.  » Read More