Real Estate Information

As the government-sponsored enterprises slowly wind down their massive domination of the mortgage finance markets, the most likely parties to fill the capital hole left behind are the big four banks.

However, how well or how much the big four can cover remain up for discussion.

On Tuesday, speakers tossed ideas back and forth at a panel titled: "Housing Finance Reform Proposals." They gathered in Washington at the annual meeting of the American Securitization Forum, a trade group representing secondary market players.

One speaker wryly referred to the unofficial title of the panel as "life without the GSEs." The future may be murky, and the present is unlikely to change in the near-term, one panelist said.

The evolution of the mortgage finance markets away from government support will become clearer as financial reform under Dodd-Frank begins to take hold. Until then, according to Alfred Pollard, general counsel Federal Housing Finance Agency, the government will continue support Fannie Mae, Freddie Mac and the dozen Federal Home Loan Banks.

"If the enterprises are in conservatorship we are supposed to conserve their assets," Pollard said. "We made a decision that Fannie and Freddie, and home loan banks should stick to their core businesses."

Moderator Christopher DiAngelo, partner at Katten Muchin Rosenman, said Bank of America (BAC: 10.6215 -1.56%), Citigroup(C: 38.77 -1.87%), JPMorgan Chase(JPM: 39.84 -2.09%) and Wells Fargo(WF: 36.68+0.41%) hold 70% of the private mortgage origination market. Therefore, they seem the likely option to take market share from the GSEs.

Others financing options, such as developing a covered bond market or a greater presence of private investor bases, such as from real estate investment trusts, are only going to handle a small portion of the financing, the panel said.

"A covered bond market does not solve a lot of problems," said Nancy Mueller Handal of MetLife Investments, a $45 billion investor in mortgage-backed securities, 80% of which are GSE bonds.

"There is not the investor base to fill the gap that people think. We would have very little room for covered bonds," she added.

Furthermore, investors want a stronger foundation for investments in private-label MBS. Those investors will want vertical risk retention, adequate access to representations and warranties and a third-party arbitrator assigned to deals.

"The pipes are not in place yet," Handal added.

A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues:

The Federal Deposit Insurance Corp. is in settlement talks with former Washington Mutual CEO Kerry Killinger and at least one other top former executive after filing suit against the parties for risks they took within WaMu's home lending portfolio before the housing crisis, according to the Sacramento Bee.

The original suit named former Chief Executive Officer Kerry Killinger, former Chief Operating Officer Stephen Rotella and former Home Loans president David Schneider defendants.

The Federal Reserve Open Market Committee will hold a two-day meeting this week to discuss recent economic data and the second half of 2011.

The meeting, which will run from June 21 to 22, will be the first closed discussion of FOMC members since late April and since reports surfaced showing housing prices on a continued downward trajectory. The scheduled meet-up arrives two weeks after Federal Reserve Chairman Ben Bernanke delivered a somber first-half economic update. In the report, Bernanke said high unemployment and anemic housing sales are slowing economic growth.

Looking forward, economists at Moody's Analyticsare sticking with their estimate of real GDP growth in the 2% range for the current quarter. They also expect housing prices to remain on the decline for a while, with a bottom expected sometime next year. While the analysts forecast growth for quarters three and four, they also remain wary, citing a sluggish recovery and ongoing concerns over the nation's debt ceiling.

A dispute between big banks, bond insurer MBIA and the New York State Insurance Departmentcontinued this past week, with both sides debating the meaning of internal MBIA e-mails released in court documents.

The dispute involves banking plaintiffs — including Bank of America (BAC: 10.5554 -1.17%) whom allege the New York Insurance Department and its former superintendent, Eric Dinallo, approved a fraudulent conveyance by permitting MBIA to create a second insurance firm, using $5 billion siphoned from the company's insurance subsidiary. Some of the original plaintiffs, CitiGroup and JPMorgan Chase have already pulled out of the suit, according to sources at MBIA.

The plaintiffs in a brief with an appellate court released e-mails which they believe show MBIA leadership working to influence NYID to approve the deal.

Meanwhile, MBIA responded in a statement saying: "The banks grossly mischaracterize these documents and fail to cite the overwhelming evidence in the record confirming that the NYID received unfettered access to MBIA's records and employees, and conducted a thorough and extensive review of MBIA's financial condition."

"We look forward to responding to all of the banks' misleading arguments and mischaracterizations when MBIA responds to the banks' papers on August 31," the statement said. "We remain confident that after a review of the full record the court will affirm the NYID's approval of MBIA's transformation."

The FDIC closed two banks this past week. First, the agency was appointed receiver after Florida regulators shuttered the doors of First Commercial Bank of Tampa Bay in Tampa. Shortly thereafter, Stonegate Bank of Fort Lauderdale assumed all of the banks deposits.

In addition, regulators closed McIntosh State Bank in Jackson, Ga., with Hamilton State Bank assigned all of the deposits.

The National Reverse Mortgage Lenders Association doesn't believe Wells Fargo's (WFC: 27.25 +1.68%) decision to end its reverse mortgage business will be the death knell for the loan product.

The banking giant canceled that line of lending, saying unpredictable home values and restrictions on the loans are making it impractical to continue in that segment.

"All current Wells Fargo reverse mortgage borrowers will continue to be serviced and funds made available," said Peter Bell, president of the trade group. "Demand for HECM loans remains strong. In fact, the HECM program has evolved to meet the changing economic times with the recent introduction of the HECM saver, a new product that reduces costs and increases consumer protections."

Reverse mortgages allow homeowners who are at least 62 years old to borrow against equity in their property without having to make monthly payments. The balance on the loan is not due until the borrower no longer occupies the home as a primary residence.

NRMLA said ongoing demand for reverse mortgages prompted the association to work with the Department of Housing and Urban Development to develop procedures to evaluate borrower income and insure the ability to pay taxes and insurance on the property after the reverse mortgage deal closes.

"It is anticipated (HUD) will be issuing a rule change in the future to provide HECM lenders with the discretion to make these necessary underwriting changes," the NRMLA said.

JPMorgan (JPM: 40.91 +1.36%) predicted a further dip in home prices this past month, forecasting another 4% to 5% drop in home values between now and mid-2012.

In its June 2011 Home Price Monitor Report, the bank lowered its base home price forecast to a level that's 37% under peak price levels.

The financial services firm blames its lowered price expectations on a supply-and-demand imbalance, as well as anemic consumer demand and disappointing economic reports.

The good news is CoreLogic's home price index grew a slight 0.7% in April, which shows some signs of possible price stability, JPMorgan said.

But home prices still declined more than anticipated in the first quarter, reaching a new post-2006 low, the bank said.

Making matters worse, JPMorgan's Home Price Monitor report points to a 12% drop in pending home sales in the month of April.

The bank said "a looming question is when and if lending standards will ease enough to boost demand."

Homeowners who are already experiencing problems paying their mortgages will not benefit by trying to "wait things out." There are no indications that home prices will recover any time soon - but there are signs that they could drop even further.

The nationwide average home price is already down 34% nationwide from the high in 2006 - and two separate studies released this week predict that the slide is far from over.

Housing prices have dropped every month since the federal government’s tax break for homebuyers expired last September. Overall, that’s a drop of 5% in the last year alone.

However, a new report released this month by JPMorgan and reported by the HousingWire forecasts a base price level that is 37% below peak prices - in other words, even lower than current levels. They indicate that home prices could stand to fall another 4 to 5% in the next year.

But Yale University professor, and co-founder of the Standard & Poor Case-Shiller Home Price Index, Robert Shiller, is even more pessimistic. As reported by the HousingWire, Shiller forecasts a longer-term but even greater drop in home prices - a possible decline of between 10 and 25% in real terms over the next five years.

Fundamental factors are holding home prices down; and these factors are all tied together, so will not resolve themselves soon:

• too many homeowners are underwater on their mortgages (as of April last year, over 6 million homeowners - representing nearly 8% of home mortgages nationwide - were either delinquent on their loans or in foreclosure)
• too many banks hold loans that are no longer worth the value of the collateral that secures them
• because of both of those factors, too many homes are being sold at “distressed” prices, either by the homeowners or through trustee sales

On top of these factors, the growing shadow inventory of properties (currentlly estimated to take over 3 years to clear) that will come on the market in the future also will continue to depress home prices for years to come. 

What this means for homeowners who are currently struggling to pay their mortgages is that waiting for the market to improve is a dangerous strategy. Home prices are likely to continue dropping for one to five years.

For homeowners who are already in trouble now, or who foresee financial trouble coming, this is their opportunity to take action - before home prices drop even further.

Short sales are an increasingly popular option with both homeowners and with lenders. The majority of our first-mortgage approvals come with full deficiency waivers for our homeowners, and an increasing percentage of our second-mortgage approvals also waive the deficiency balance on the loan, allowing distressed homeowners to shed all of their mortgage debt and get a clean financial start in life.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://krisweaver.com/short-sale.

The Kris Weaver Real Estate Team is looking for 2 more buyers agents! You could sell 30 minimum homes a year with Hampton Road's #1 Real Estate Team. Send us a message or call 757-340-5555.

The Kris Weaver Real Estate Team is among 10 or so real estate agents (out of the 4,000 licensed) to offer a completely free moving truck to their clients in Hampton Roads.

Recently we had a client sell their home in Ocean Lakes in Virginia Beach to buy a larger home in Castleton, also in Virginia Beach. "Life Saver," and "So Convenient," were some of the comments that we heard from these happy clients.

Unlike having to rent a truck or paying for a moving service, we allow our clients to keep the truck for as long as they like as long as it is available. We do all of this for free.

When an opportunity comes along to make buying or selling a home in the Hampton Roads area easier, the Kris Weaver Team will be there - making life easier for our clients and raising the bar for the entire industry.

We are pleased to announce that the Kris Weaver Real Estate Team is now an independent brokerage! Thank you all for the support!

The Kris Weaver Real Estate Team would like to wish you a Happy New Year!

Now is the time to find your perfect home. KrisWeaver.com makes this possible! Browse through our Featured Properties or search all of our MLS listings!

I recently listed a property in Weslyan Chase,  a townhome that is featured on our website.   This property easily fits into the first time buyer category being under 200K.     Weslyan Chase has two primary sections, one made up of comfortable single family homes starting in the low 200's with the largest going for over 300K, the other section is surprisingly spacious townhomes with and without garages.   The largest of these top out at about 195K with over 1600 square feet and a garage.

Many home buyers choose Weslyan Chase for it's neighborhood feel, multiple parks, it's relatively new design and construction, along with it's convenient proximity to many of the areas large employment centers

I listed the property during the middle of last week.   The owner, a referred client, took my recommendations with respect to pricing and a couple of fix up items /improvements.   Also the owner packed everything away that needed to be packed and did a little touch of painting.   The property showed perfectly, our pricing strategy priced the property ever so slightly under the middle of the pricing spectrum.   3 days later we are negotiating with a buyer for the home.   2 days later we are under contract at the median price and above the list price for the home.   

Proper staging and pricing made the difference with this home.  Buyer's loved it, and in the end multiple buyers became interested very quickly.