Freddie Raises Fees - Realtors Quietly Weep

Freddie Mac posted on its Web site late Friday higher fees that will raise costs for some home mortgage borrowers.

The move by the government-backed mortgage investor follows similar fee increases by its main rival, Fannie Mae, in December. A series of such increases over the past 15 months has drawn protests from the National Association of Realtors and the National Association of Home Builders. The trade groups say Fannie and Freddie are adding costs that deter home buying or refinancing at a time when the housing market badly needs a boost.

Freddie's announcement cited growing risks of mortgage defaults as home prices continue to drop. It noted that prices are down more than 30% from a year ago in some areas and said "all industry indicators" point to further declines in 2009.

Freddie's higher fees affect mortgages that finance condominiums; loans that allow borrowers to pay only interest in the initial years and defer principal repayments; refinance loans that allow the borrower to cash out some of their home equity, and loans with certain combinations of low credit scores and down payments.

Fannie and Freddie don't deal directly with consumers but have a big influence on the rates and fees they pay. For mortgages up to a limit of $625,500 in the most expensive areas of the country, the two companies acquire or guarantee loans that have been originated by lenders. For a growing number of loans, Fannie and Freddie reduce the price they will pay (through "delivery fees" or "loan level price adjustments") to compensate for what they see as higher risk characteristics. These surcharges typically are passed on to consumers in the form of higher loan fees or interest rates.

For instance, Freddie announced a fee of 0.75% of the loan amount on certain mortgages for condos on which the loan amounts to more than 75% of the estimated home value.Source Wall Street Journal

Minnesota Attorney General Cracks Down On Predatory Foreclosure Servicers

Minnesota Attorney General Lori Swanson today filed lawsuits against two so-called mortgage “foreclosure consultants” alleging that they targeted homeowners facing foreclosure with illegal up-front fees and empty promises to save their homes. The lawsuits are against IMC Financial Services, LLC (“IMC”) and American Financial Corp. d/b/a National Foreclosure Counseling Services (“NFC”), both with offices in Florida. The lawsuits allege that both companies unlawfully charged up-front fees as high as $1,850 and failed to deliver promised services to save the homes from foreclosure. Today’s lawsuits bring to twelve the number of bogus foreclosure consultants sued by the Attorney General in the last year.

Foreclosure consultants typically represent that they will save a homeowner’s home from foreclosure by negotiating or modifying the terms of the homeowner’s existing mortgage. A 2004 Minnesota law bars “foreclosure consultants” from charging any compensation until after the foreclosure consultant has “fully performed each and every service the foreclosure consultant contracted to perform or represented he or she would perform.”
(Atypically, these companies will do little or no work for their fee. And because of privacy concerns, lenders are leary about discussing finances with third parties. The best way to prevent foreclosure is for the homeowner to contact the lenders directly and if necessary consult an attorney licensed in the state of Minnesota for additional assistance.) (editorial comment).

The Attorney General also expressed concern about a new breed of company that operates like a foreclosure consultant in promising to negotiate or modify the terms of the homeowner’s existing mortgage, but instead targets homeowners who may be struggling financially but are not yet in default or foreclosure. Swanson and state legislators proposed legislation designed to close loopholes in existing state law regulating foreclosure consultants and to prohibit so-called mortgage modification companies from soliciting up-front fees and then failing to deliver the promised services. Source: Press release from Minnesota Attorney Generals office.

Nowhere To Go But Up...Hopefully

An index of home prices in 20 major metropolitan areas fell at a record annual pace in November, to levels not seen since 2004, according to a report released Tuesday.

The S&P Case-Shiller Home Price Index, a sampling of 20 cities from across the nation, fell a record 18.2% over the 12 months ended Nov. 30. That brought the index to its lowest point since February 2004. From its peak in mid-2006, the index has plunged a whopping 25.1%.

Eleven of the 20 cities showed record declines, and the 12-month price drop for 14 of the cities was a double-digit percentage.

"The freefall in residential real estate continued through November 2008," said David M. Blitzer, chairman of the Index Committee at Standard & Poor's, in a prepared statement. He said the 20-city index has fallen for every month since August 2006, a total of 28 consecutive months.

The decline was very broad, with prices down at least 1% in every region of the nation during the October-November period. Eight regions recorded record monthly declines, according to Blitzer.

As has become the norm, Southwest cities were the hardest hit, with Las Vegas prices dropping 3.9%, the nation's worst decline. Phoenix, at 3.4% was second. The Arizona metropolis recorded the worst 12-month decline, at 32.9%, followed by Las Vegas, at 31.6%.

New York and Cleveland prices fell by only 1% for the month, the smallest November drops. The best 12-month performer was Dallas, where prices slipped by 3.3%. Other 12-month, single-digit percentage drops were recorded by Denver, at 4.3%, Cleveland, at 5.2%, and Charlotte N.C., at 5.3%.

Locally, home values have dropped 16.3 percent compared to a national 20 city average of 18.2 percent.

But there was some positive news in Monday's report from the National Association of Realtors, which showed a bump up in the number of existing homes sold during December.

"We're clearly seeing some of the impact of falling prices," said Larson. "But the problem is that many of those sales are made at the cheapest prices [often of bank repossessed properties], making it hard for normal homeowners to sell."

He does not foresee any swift improvement in housing markets - not as long as industries of all kinds keep announcing new layoffs, as several companies did Monday when more than 70,000 Americans learned they would lose their jobs.

"Home prices will likely decline, albeit at a slower pace, for the rest of 2009," said Larson. Courtesy Case-Shiller and CNN.

Foreclosures Up An Astounding 81 Percent From 2007

The number of homes in the foreclosure pipeline jumped 81% in 2008 compared with 2007, despite massive efforts by lenders and governments to stem the tide, according to a report released Thursday by RealtyTrac.

A total of 2.3 million homes had at least one legal notice of foreclosure filed during 2008, one of out every 54 homes in America, the report said. The filings can include default notices, auction sale notices and bank repossessions.

In December, 303,410 properties received a foreclosure filing of some kind, up 17% from November and up 41% from December 2007.

"Clearly the foreclosure prevention programs implemented to-date have not had any real success in slowing down this foreclosure tsunami," said James Saccacio, chief executive officer of RealtyTrac. Many lenders and loan servicers have been working to modify loans to prevent or delay foreclosures.

Fannie Mae and Freddie Mac imposed a moratorium on new foreclosures, and several states, including California, passed new rules designed to slow down foreclosures. Democrats in Congress are pushing for $50 billion to be spent on foreclosure relief out of the second part of the $700 billion from the Troubled Asset Relief Program.

Locally, one out of three homes listed on an average day are marketed as foreclosed homes.

November Was A Disaster For Home Sales...December May Be Worse

Pending U.S. home sales fell to the lowest level on record in November, as the plummeting stock market and faltering economy caused buyers to delay their purchases, the National Association of Realtors (NAR) said Tuesday.

U.S. existing home sales plunged to a rate of 4.49 million in November, down 8.6 percent from October. When the final tally for 2008 is complete, it is likely to be the worst year for home sales in at least in a decade. Plus, with job losses mounting, there appears to be no quick turnaround this year.

Typically there is a one- to two-month lag between a contract and a done deal. So November's decline foreshadows bleak results for December's existing home sales numbers, set to be release Jan. 26.

Sales contracts fell around the country, but were weakest in the Northeast and Midwest.

Pending sales now sit at the lowest in its eight-years -- beating the previous record low in March 2008.

Lobbyists for the real estate industry are using the deteriorating housing market data to call on President-elect Barack Obama to devote attention to sinking home prices and sales -- the genesis of the recession.

The U.S. has been coping with the worst housing recession in decades, and many in the real estate, banking and mortgage industries are poring through each month's data for signs of a bottom, with no luck so far.

Indeed, the contracting economy makes the timing of any recovery a moving target. Home sales are growing in foreclosure-plagued areas like Las Vegas and Los Angeles, but are still sinking in most of the country. The Realtors group estimates that 45 percent of existing home sales are now foreclosures and other distressed properties.

Lawrence Yun, NAR chief economist, forecasts a modest increase in home sales for 2009. He projects sales will be up 6.6 percent, after plunging by around 13 percent in both 2007 and 2008. Prices are forecasts to remain relatively level with a median of $198,100 this year, up from $197,000 last year. Courtesy Business Week.